Correlation Between Vanguard 500 and FREEPORT

Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and FREEPORT 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 Vanguard 500 and FREEPORT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard 500 Index and FREEPORT MCMORAN INC 525, you can compare the effects of market volatilities on Vanguard 500 and FREEPORT 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 Vanguard 500 with a short position of FREEPORT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and FREEPORT.

Diversification Opportunities for Vanguard 500 and FREEPORT

0.31

Correlation Coefficient

Vanguard 500  FREEPORT

Weak diversification

The 3 months correlation between Vanguard and FREEPORT is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and FREEPORT MCMORAN INC 525 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FREEPORT MCMORAN INC and Vanguard 500 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 Vanguard 500 Index are associated (or correlated) with FREEPORT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FREEPORT MCMORAN INC has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and FREEPORT go up and down completely randomly.

Pair Corralation between Vanguard 500 and FREEPORT

Assuming the 90 days horizon Vanguard 500 Index is expected to under-perform the FREEPORT. In addition to that, Vanguard 500 is 3.17 times more volatile than FREEPORT MCMORAN INC 525. It trades about -0.13 of its total potential returns per unit of risk. FREEPORT MCMORAN INC 525 is currently generating about -0.01 per unit of volatility. If you would invest  10,161  in FREEPORT MCMORAN INC 525 on December 11, 2024 and sell it today you would lose (31.00) from holding FREEPORT MCMORAN INC 525 or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Vanguard 500 Index  vs.  FREEPORT MCMORAN INC 525

Vanguard 500 Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard 500 Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

FREEPORT MCMORAN INC

Risk-Adjusted Performance

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

Pair Trading with Vanguard 500 and FREEPORT

The main advantage of trading using opposite Vanguard 500 and FREEPORT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, FREEPORT 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 FREEPORT will offset losses from the drop in FREEPORT's long position.

The idea behind Vanguard 500 Index and FREEPORT MCMORAN INC 525 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.