Correlation Between Sable Offshore and Freeport

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

By analyzing existing cross correlation between Sable Offshore Corp and Freeport McMoRan 5 percent, you can compare the effects of market volatilities on Sable Offshore and Freeport 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 Sable Offshore with a short position of Freeport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sable Offshore and Freeport.

Diversification Opportunities for Sable Offshore and Freeport

0.12

Correlation Coefficient

Sable Offshore  Freeport

Average diversification

The 3 months correlation between Sable and Freeport is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sable Offshore Corp and Freeport McMoRan 5 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 5 and Sable Offshore 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 Sable Offshore Corp are associated (or correlated) with Freeport. 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 5 has no effect on the direction of Sable Offshore i.e., Sable Offshore and Freeport go up and down completely randomly.

Pair Corralation between Sable Offshore and Freeport

Considering the 90-day investment horizon Sable Offshore Corp is expected to generate 6.01 times more return on investment than Freeport. However, Sable Offshore is 6.01 times more volatile than Freeport McMoRan 5 percent. It trades about 0.07 of its potential returns per unit of risk. Freeport McMoRan 5 percent is currently generating about 0.0 per unit of risk. If you would invest  1,012  in Sable Offshore Corp on September 28, 2024 and sell it today you would earn a total of  1,388  from holding Sable Offshore Corp or generate 137.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Sable Offshore Corp  vs.  Freeport McMoRan 5 percent

Sable Offshore Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sable Offshore Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Sable Offshore is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Freeport McMoRan 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 5 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sable Offshore and Freeport

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

The idea behind Sable Offshore Corp and Freeport McMoRan 5 percent 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.