Correlation Between Freeport McMoRan and BOSTON BEER

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

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

Diversification Opportunities for Freeport McMoRan and BOSTON BEER

-0.52

Correlation Coefficient

Freeport McMoRan  BOSTON BEER

Excellent diversification

The 3 months correlation between Freeport and BOSTON is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and BOSTON BEER A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOSTON BEER A 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 BOSTON BEER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOSTON BEER A has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and BOSTON BEER go up and down completely randomly.

Pair Corralation between Freeport McMoRan and BOSTON BEER

Assuming the 90 days trading horizon Freeport McMoRan is expected to under-perform the BOSTON BEER. In addition to that, Freeport McMoRan is 1.12 times more volatile than BOSTON BEER A . It trades about -0.11 of its total potential returns per unit of risk. BOSTON BEER A is currently generating about 0.05 per unit of volatility. If you would invest  24,960  in BOSTON BEER A on October 13, 2024 and sell it today you would earn a total of  1,260  from holding BOSTON BEER A or generate 5.05% return on investment over 90 days.

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

Freeport McMoRan  vs.  BOSTON BEER A

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.

BOSTON BEER A

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, BOSTON BEER is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Freeport McMoRan and BOSTON BEER

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

The idea behind Freeport McMoRan and BOSTON BEER A 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.