Correlation Between Freeport McMoRan and IShares Global

Can any of the company-specific risk be diversified away by investing in both Freeport McMoRan and IShares Global 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 Freeport McMoRan and IShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Freeport McMoRan and iShares Global Timber, you can compare the effects of market volatilities on Freeport McMoRan and IShares Global 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 Freeport McMoRan with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoRan and IShares Global.

Diversification Opportunities for Freeport McMoRan and IShares Global

-0.81

Correlation Coefficient

Freeport McMoRan  IShares Global

Pay attention - limited upside

The 3 months correlation between Freeport and IShares is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and iShares Global Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Timber and Freeport McMoRan 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 Freeport McMoRan are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Timber has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and IShares Global go up and down completely randomly.

Pair Corralation between Freeport McMoRan and IShares Global

Assuming the 90 days trading horizon Freeport McMoRan is expected to under-perform the IShares Global. In addition to that, Freeport McMoRan is 35.06 times more volatile than iShares Global Timber. It trades about -0.12 of its total potential returns per unit of risk. iShares Global Timber is currently generating about 0.13 per unit of volatility. If you would invest  177,917  in iShares Global Timber on December 1, 2024 and sell it today you would earn a total of  680.00  from holding iShares Global Timber or generate 0.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Freeport McMoRan  vs.  iShares Global Timber

Freeport McMoRan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freeport McMoRan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

iShares Global Timber

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Timber are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Freeport McMoRan and IShares Global

The main advantage of trading using opposite Freeport McMoRan and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoRan position performs unexpectedly, IShares Global 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 IShares Global will offset losses from the drop in IShares Global's long position.

The idea behind Freeport McMoRan and iShares Global Timber 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.