Correlation Between ALERION CLEANPOWER and Freeport McMoRan

Can any of the company-specific risk be diversified away by investing in both ALERION CLEANPOWER and Freeport McMoRan at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ALERION CLEANPOWER and Freeport McMoRan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ALERION CLEANPOWER and Freeport McMoRan, you can compare the effects of market volatilities on ALERION CLEANPOWER and Freeport McMoRan and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ALERION CLEANPOWER with a short position of Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALERION CLEANPOWER and Freeport McMoRan.

Diversification Opportunities for ALERION CLEANPOWER and Freeport McMoRan

-0.36

Correlation Coefficient

ALERION CLEANPOWER  Freeport McMoRan

Very good diversification

The 3 months correlation between ALERION and Freeport is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding ALERION CLEANPOWER and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and ALERION CLEANPOWER is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ALERION CLEANPOWER are associated (or correlated) with Freeport McMoRan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan has no effect on the direction of ALERION CLEANPOWER i.e., ALERION CLEANPOWER and Freeport McMoRan go up and down completely randomly.

Pair Corralation between ALERION CLEANPOWER and Freeport McMoRan

Assuming the 90 days trading horizon ALERION CLEANPOWER is expected to under-perform the Freeport McMoRan. But the stock apears to be less risky and, when comparing its historical volatility, ALERION CLEANPOWER is 1.01 times less risky than Freeport McMoRan. The stock trades about -0.05 of its potential returns per unit of risk. The Freeport McMoRan is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,567  in Freeport McMoRan on September 26, 2024 and sell it today you would earn a total of  186.00  from holding Freeport McMoRan or generate 5.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ALERION CLEANPOWER  vs.  Freeport McMoRan

ALERION CLEANPOWER

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ALERION CLEANPOWER are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ALERION CLEANPOWER is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Freeport McMoRan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ALERION CLEANPOWER and Freeport McMoRan

The main advantage of trading using opposite ALERION CLEANPOWER and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALERION CLEANPOWER position performs unexpectedly, Freeport McMoRan can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Freeport McMoRan will offset losses from the drop in Freeport McMoRan's long position.

The idea behind ALERION CLEANPOWER and Freeport McMoRan pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.