Correlation Between Freeport McMoran and Capstone Copper

Can any of the company-specific risk be diversified away by investing in both Freeport McMoran and Capstone Copper 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 Capstone Copper 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 Capstone Copper Corp, you can compare the effects of market volatilities on Freeport McMoran and Capstone Copper 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 Capstone Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoran and Capstone Copper.

Diversification Opportunities for Freeport McMoran and Capstone Copper

0.89

Correlation Coefficient

Freeport McMoran  Capstone Copper

Very poor diversification

The 3 months correlation between Freeport and Capstone is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoran Copper Gold and Capstone Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Copper Corp 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 Capstone Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Copper Corp has no effect on the direction of Freeport McMoran i.e., Freeport McMoran and Capstone Copper go up and down completely randomly.

Pair Corralation between Freeport McMoran and Capstone Copper

Considering the 90-day investment horizon Freeport McMoran Copper Gold is expected to generate 0.79 times more return on investment than Capstone Copper. However, Freeport McMoran Copper Gold is 1.27 times less risky than Capstone Copper. It trades about -0.09 of its potential returns per unit of risk. Capstone Copper Corp is currently generating about -0.09 per unit of risk. If you would invest  4,500  in Freeport McMoran Copper Gold on September 22, 2024 and sell it today you would lose (614.00) from holding Freeport McMoran Copper Gold or give up 13.64% of portfolio value over 90 days.

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

Freeport McMoran Copper Gold  vs.  Capstone Copper Corp

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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Capstone Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capstone Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental 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 Freeport McMoran and Capstone Copper

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

The idea behind Freeport McMoran Copper Gold and Capstone Copper Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.