Correlation Between Freeport and Zumiez

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

Diversification Opportunities for Freeport and Zumiez

0.52

Correlation Coefficient

Freeport  Zumiez

Very weak diversification

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

Pair Corralation between Freeport and Zumiez

Assuming the 90 days trading horizon Freeport is expected to generate 5.27 times less return on investment than Zumiez. But when comparing it to its historical volatility, Freeport McMoRan 54 percent is 4.72 times less risky than Zumiez. It trades about 0.01 of its potential returns per unit of risk. Zumiez Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,897  in Zumiez Inc on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Zumiez Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.63%
Values	Daily Returns

Freeport McMoRan 54 percent  vs.  Zumiez Inc

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 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.

Zumiez Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zumiez Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Freeport and Zumiez

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

The idea behind Freeport McMoRan 54 percent and Zumiez Inc 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.