Correlation Between Freeport and Wabash National

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

By analyzing existing cross correlation between Freeport McMoRan 5 percent and Wabash National, you can compare the effects of market volatilities on Freeport and Wabash National 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 Wabash National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport and Wabash National.

Diversification Opportunities for Freeport and Wabash National

-0.19

Correlation Coefficient

Freeport  Wabash National

Good diversification

The 3 months correlation between Freeport and Wabash is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan 5 percent and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 5 percent are associated (or correlated) with Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of Freeport i.e., Freeport and Wabash National go up and down completely randomly.

Pair Corralation between Freeport and Wabash National

Assuming the 90 days trading horizon Freeport McMoRan 5 percent is expected to generate 0.22 times more return on investment than Wabash National. However, Freeport McMoRan 5 percent is 4.54 times less risky than Wabash National. It trades about -0.25 of its potential returns per unit of risk. Wabash National is currently generating about -0.13 per unit of risk. If you would invest  10,011  in Freeport McMoRan 5 percent on September 20, 2024 and sell it today you would lose (319.00) from holding Freeport McMoRan 5 percent or give up 3.19% of portfolio value over 90 days.

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

Freeport McMoRan 5 percent  vs.  Wabash National

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Wabash National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Freeport and Wabash National

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

The idea behind Freeport McMoRan 5 percent and Wabash National 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.