Correlation Between Freeport McMoRan and Intel

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

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

Diversification Opportunities for Freeport McMoRan and Intel

0.14

Correlation Coefficient

Freeport McMoRan  Intel

Average diversification

The 3 months correlation between Freeport and Intel is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of Freeport McMoRan i.e., Freeport McMoRan and Intel go up and down completely randomly.

Pair Corralation between Freeport McMoRan and Intel

Assuming the 90 days trading horizon Freeport McMoRan is expected to generate 0.54 times more return on investment than Intel. However, Freeport McMoRan is 1.84 times less risky than Intel. It trades about -0.05 of its potential returns per unit of risk. Intel is currently generating about -0.05 per unit of risk. If you would invest  4,602  in Freeport McMoRan on September 19, 2024 and sell it today you would lose (742.00) from holding Freeport McMoRan or give up 16.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.22%
Values	Daily Returns

Freeport McMoRan  vs.  Intel

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.

Intel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Intel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Freeport McMoRan and Intel

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

The idea behind Freeport McMoRan and Intel 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.