Correlation Between FREEPORT and Black Hills

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

By analyzing existing cross correlation between FREEPORT MCMORAN INC 525 and Black Hills, you can compare the effects of market volatilities on FREEPORT and Black Hills 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 Black Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of FREEPORT and Black Hills.

Diversification Opportunities for FREEPORT and Black Hills

0.49

Correlation Coefficient

FREEPORT  Black Hills

Very weak diversification

The 3 months correlation between FREEPORT and Black is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding FREEPORT MCMORAN INC 525 and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills 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 INC 525 are associated (or correlated) with Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of FREEPORT i.e., FREEPORT and Black Hills go up and down completely randomly.

Pair Corralation between FREEPORT and Black Hills

Assuming the 90 days trading horizon FREEPORT MCMORAN INC 525 is expected to generate 0.45 times more return on investment than Black Hills. However, FREEPORT MCMORAN INC 525 is 2.22 times less risky than Black Hills. It trades about 0.0 of its potential returns per unit of risk. Black Hills is currently generating about -0.01 per unit of risk. If you would invest  9,885  in FREEPORT MCMORAN INC 525 on October 13, 2024 and sell it today you would lose (70.00) from holding FREEPORT MCMORAN INC 525 or give up 0.71% of portfolio value over 90 days.

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

FREEPORT MCMORAN INC 525  vs.  Black Hills

FREEPORT MCMORAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FREEPORT MCMORAN INC 525 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.

Black Hills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Hills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's forward-looking signals remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with FREEPORT and Black Hills

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

The idea behind FREEPORT MCMORAN INC 525 and Black Hills 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.