Correlation Between Freeport McMoRan and AOYAMA TRADING

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

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

Diversification Opportunities for Freeport McMoRan and AOYAMA TRADING

-0.75

Correlation Coefficient

Freeport McMoRan  AOYAMA TRADING

Pay attention - limited upside

The 3 months correlation between Freeport and AOYAMA is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and AOYAMA TRADING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AOYAMA TRADING 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 AOYAMA TRADING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AOYAMA TRADING has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and AOYAMA TRADING go up and down completely randomly.

Pair Corralation between Freeport McMoRan and AOYAMA TRADING

Assuming the 90 days trading horizon Freeport McMoRan is expected to under-perform the AOYAMA TRADING. But the stock apears to be less risky and, when comparing its historical volatility, Freeport McMoRan is 2.6 times less risky than AOYAMA TRADING. The stock trades about -0.11 of its potential returns per unit of risk. The AOYAMA TRADING is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  840.00  in AOYAMA TRADING on October 9, 2024 and sell it today you would earn a total of  550.00  from holding AOYAMA TRADING or generate 65.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Freeport McMoRan  vs.  AOYAMA TRADING

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.

AOYAMA TRADING

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AOYAMA TRADING are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AOYAMA TRADING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Freeport McMoRan and AOYAMA TRADING

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

The idea behind Freeport McMoRan and AOYAMA TRADING 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.