Correlation Between Freeport McMoRan and TERADATA

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

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

Diversification Opportunities for Freeport McMoRan and TERADATA

-0.65

Correlation Coefficient

Freeport McMoRan  TERADATA

Excellent diversification

The 3 months correlation between Freeport and TERADATA is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and TERADATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TERADATA 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 TERADATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TERADATA has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and TERADATA go up and down completely randomly.

Pair Corralation between Freeport McMoRan and TERADATA

Assuming the 90 days trading horizon Freeport McMoRan is expected to under-perform the TERADATA. In addition to that, Freeport McMoRan is 2.48 times more volatile than TERADATA. It trades about -0.27 of its total potential returns per unit of risk. TERADATA is currently generating about 0.0 per unit of volatility. If you would invest  3,000  in TERADATA on October 6, 2024 and sell it today you would earn a total of  0.00  from holding TERADATA or generate 0.0% return on investment over 90 days.

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

Freeport McMoRan  vs.  TERADATA

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 fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

TERADATA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TERADATA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TERADATA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Freeport McMoRan and TERADATA

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

The idea behind Freeport McMoRan and TERADATA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.