Correlation Between Antofagasta Plc and Freeport McMoRan

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

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

Diversification Opportunities for Antofagasta Plc and Freeport McMoRan

0.69

Correlation Coefficient

Antofagasta Plc  Freeport McMoRan

Poor diversification

The 3 months correlation between Antofagasta and Freeport is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Antofagasta plc and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and Antofagasta Plc 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 Antofagasta plc 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 Antofagasta Plc i.e., Antofagasta Plc and Freeport McMoRan go up and down completely randomly.

Pair Corralation between Antofagasta Plc and Freeport McMoRan

Assuming the 90 days horizon Antofagasta plc is expected to generate 1.16 times more return on investment than Freeport McMoRan. However, Antofagasta Plc is 1.16 times more volatile than Freeport McMoRan. It trades about 0.03 of its potential returns per unit of risk. Freeport McMoRan is currently generating about -0.16 per unit of risk. If you would invest  1,997  in Antofagasta plc on September 19, 2024 and sell it today you would earn a total of  20.00  from holding Antofagasta plc or generate 1.0% return on investment over 90 days.

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

Antofagasta plc  vs.  Freeport McMoRan

Antofagasta plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Antofagasta plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Antofagasta Plc 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 nearly stable primary indicators, Freeport McMoRan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Antofagasta Plc and Freeport McMoRan

The main advantage of trading using opposite Antofagasta Plc and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Antofagasta Plc 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 Antofagasta plc 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.