Correlation Between Freeport McMoran and Amerigo Resources

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

By analyzing existing cross correlation between Freeport McMoran Copper Gold and Amerigo Resources, you can compare the effects of market volatilities on Freeport McMoran and Amerigo Resources 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 Amerigo Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoran and Amerigo Resources.

Diversification Opportunities for Freeport McMoran and Amerigo Resources

0.85

Correlation Coefficient

Freeport McMoran  Amerigo Resources

Very poor diversification

The 3 months correlation between Freeport and Amerigo is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoran Copper Gold and Amerigo Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amerigo Resources 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 Copper Gold are associated (or correlated) with Amerigo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amerigo Resources has no effect on the direction of Freeport McMoran i.e., Freeport McMoran and Amerigo Resources go up and down completely randomly.

Pair Corralation between Freeport McMoran and Amerigo Resources

Considering the 90-day investment horizon Freeport McMoran is expected to generate 11.92 times less return on investment than Amerigo Resources. But when comparing it to its historical volatility, Freeport McMoran Copper Gold is 1.18 times less risky than Amerigo Resources. It trades about 0.0 of its potential returns per unit of risk. Amerigo Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  95.00  in Amerigo Resources on September 20, 2024 and sell it today you would earn a total of  14.00  from holding Amerigo Resources or generate 14.74% return on investment over 90 days.

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

Freeport McMoran Copper Gold  vs.  Amerigo Resources

Freeport McMoran Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoran Copper Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Amerigo Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amerigo Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Freeport McMoran and Amerigo Resources

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

The idea behind Freeport McMoran Copper Gold and Amerigo Resources 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.