Correlation Between Freeport and Cementos Pacasmayo

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

By analyzing existing cross correlation between Freeport McMoRan 54 percent and Cementos Pacasmayo SAA, you can compare the effects of market volatilities on Freeport and Cementos Pacasmayo 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 with a short position of Cementos Pacasmayo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport and Cementos Pacasmayo.

Diversification Opportunities for Freeport and Cementos Pacasmayo

-0.52

Correlation Coefficient

Freeport  Cementos Pacasmayo

Excellent diversification

The 3 months correlation between Freeport and Cementos is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan 54 percent and Cementos Pacasmayo SAA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cementos Pacasmayo SAA and Freeport 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 54 percent are associated (or correlated) with Cementos Pacasmayo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cementos Pacasmayo SAA has no effect on the direction of Freeport i.e., Freeport and Cementos Pacasmayo go up and down completely randomly.

Pair Corralation between Freeport and Cementos Pacasmayo

Assuming the 90 days trading horizon Freeport McMoRan 54 percent is expected to under-perform the Cementos Pacasmayo. But the bond apears to be less risky and, when comparing its historical volatility, Freeport McMoRan 54 percent is 1.59 times less risky than Cementos Pacasmayo. The bond trades about -0.35 of its potential returns per unit of risk. The Cementos Pacasmayo SAA is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  564.00  in Cementos Pacasmayo SAA on September 26, 2024 and sell it today you would lose (26.00) from holding Cementos Pacasmayo SAA or give up 4.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Freeport McMoRan 54 percent  vs.  Cementos Pacasmayo SAA

Freeport McMoRan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 54 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Freeport McMoRan 54 percent investors.

Cementos Pacasmayo SAA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cementos Pacasmayo SAA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cementos Pacasmayo is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Freeport and Cementos Pacasmayo

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

The idea behind Freeport McMoRan 54 percent and Cementos Pacasmayo SAA 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.