Correlation Between Alphabet and Freeport McMoRan

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

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

Diversification Opportunities for Alphabet and Freeport McMoRan

-0.08

Correlation Coefficient

Alphabet  Freeport McMoRan

Good diversification

The 3 months correlation between Alphabet and Freeport is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Freeport McMoRan go up and down completely randomly.

Pair Corralation between Alphabet and Freeport McMoRan

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.48 times more return on investment than Freeport McMoRan. However, Alphabet Inc Class C is 2.08 times less risky than Freeport McMoRan. It trades about -0.33 of its potential returns per unit of risk. Freeport McMoRan is currently generating about -0.2 per unit of risk. If you would invest  18,799  in Alphabet Inc Class C on December 10, 2024 and sell it today you would lose (2,018) from holding Alphabet Inc Class C or give up 10.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Alphabet Inc Class C  vs.  Freeport McMoRan

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Freeport McMoRan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freeport McMoRan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alphabet and Freeport McMoRan

The main advantage of trading using opposite Alphabet and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.