Correlation Between Freeport and Genuine Parts

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

By analyzing existing cross correlation between Freeport McMoRan 425 percent and Genuine Parts Co, you can compare the effects of market volatilities on Freeport and Genuine Parts 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 Genuine Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport and Genuine Parts.

Diversification Opportunities for Freeport and Genuine Parts

0.11

Correlation Coefficient

Freeport  Genuine Parts

Average diversification

The 3 months correlation between Freeport and Genuine is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan 425 percent and Genuine Parts Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 425 percent are associated (or correlated) with Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of Freeport i.e., Freeport and Genuine Parts go up and down completely randomly.

Pair Corralation between Freeport and Genuine Parts

Assuming the 90 days trading horizon Freeport McMoRan 425 percent is expected to generate 0.41 times more return on investment than Genuine Parts. However, Freeport McMoRan 425 percent is 2.47 times less risky than Genuine Parts. It trades about 0.01 of its potential returns per unit of risk. Genuine Parts Co is currently generating about -0.03 per unit of risk. If you would invest  9,411  in Freeport McMoRan 425 percent on October 26, 2024 and sell it today you would earn a total of  166.00  from holding Freeport McMoRan 425 percent or generate 1.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.99%
Values	Daily Returns

Freeport McMoRan 425 percent  vs.  Genuine Parts Co

Freeport McMoRan 425

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 425 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.

Genuine Parts

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Genuine Parts Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Genuine Parts is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Freeport and Genuine Parts

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

The idea behind Freeport McMoRan 425 percent and Genuine Parts Co 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.