Correlation Between Gold Royalty and Freeport McMoran

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

By analyzing existing cross correlation between Gold Royalty Corp and Freeport McMoran Copper Gold, you can compare the effects of market volatilities on Gold Royalty 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 Gold Royalty with a short position of Freeport McMoran. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Royalty and Freeport McMoran.

Diversification Opportunities for Gold Royalty and Freeport McMoran

0.67

Correlation Coefficient

Gold Royalty  Freeport McMoran

Poor diversification

The 3 months correlation between Gold and Freeport is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gold Royalty Corp and Freeport McMoran Copper Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoran Copper and Gold Royalty 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 Gold Royalty Corp 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 Copper has no effect on the direction of Gold Royalty i.e., Gold Royalty and Freeport McMoran go up and down completely randomly.

Pair Corralation between Gold Royalty and Freeport McMoran

Given the investment horizon of 90 days Gold Royalty is expected to generate 2.1 times less return on investment than Freeport McMoran. In addition to that, Gold Royalty is 1.28 times more volatile than Freeport McMoran Copper Gold. It trades about 0.02 of its total potential returns per unit of risk. Freeport McMoran Copper Gold is currently generating about 0.06 per unit of volatility. If you would invest  4,124  in Freeport McMoran Copper Gold on September 2, 2024 and sell it today you would earn a total of  296.00  from holding Freeport McMoran Copper Gold or generate 7.18% return on investment over 90 days.

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

Gold Royalty Corp  vs.  Freeport McMoran Copper Gold

Gold Royalty Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Royalty Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Gold Royalty is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Freeport McMoran Copper

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Freeport McMoran Copper Gold are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Freeport McMoran may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gold Royalty and Freeport McMoran

The main advantage of trading using opposite Gold Royalty and Freeport McMoran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Royalty 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 Gold Royalty Corp and Freeport McMoran Copper Gold 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.