Correlation Between Freeport and Rave Restaurant

Can any of the company-specific risk be diversified away by investing in both Freeport and Rave Restaurant 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 Rave Restaurant 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 Rave Restaurant Group, you can compare the effects of market volatilities on Freeport and Rave Restaurant 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 Rave Restaurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport and Rave Restaurant.

Diversification Opportunities for Freeport and Rave Restaurant

-0.54

Correlation Coefficient

Freeport  Rave Restaurant

Excellent diversification

The 3 months correlation between Freeport and Rave is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan 54 percent and Rave Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rave Restaurant Group 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 Rave Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rave Restaurant Group has no effect on the direction of Freeport i.e., Freeport and Rave Restaurant go up and down completely randomly.

Pair Corralation between Freeport and Rave Restaurant

Assuming the 90 days trading horizon Freeport McMoRan 54 percent is expected to generate 0.38 times more return on investment than Rave Restaurant. However, Freeport McMoRan 54 percent is 2.6 times less risky than Rave Restaurant. It trades about -0.33 of its potential returns per unit of risk. Rave Restaurant Group is currently generating about -0.14 per unit of risk. If you would invest  10,092  in Freeport McMoRan 54 percent on September 27, 2024 and sell it today you would lose (722.00) from holding Freeport McMoRan 54 percent or give up 7.15% 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.  Rave Restaurant Group

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.

Rave Restaurant Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rave Restaurant Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rave Restaurant exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Freeport and Rave Restaurant

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

The idea behind Freeport McMoRan 54 percent and Rave Restaurant Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.