Correlation Between Valhi and Freeport McMoran

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

By analyzing existing cross correlation between Valhi Inc and Freeport McMoran Copper Gold, you can compare the effects of market volatilities on Valhi and Freeport McMoran 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 Valhi with a short position of Freeport McMoran. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valhi and Freeport McMoran.

Diversification Opportunities for Valhi and Freeport McMoran

0.11

Correlation Coefficient

Valhi  Freeport McMoran

Average diversification

The 3 months correlation between Valhi and Freeport is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and Freeport McMoran Copper Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoran Copper and Valhi 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 Valhi Inc are associated (or correlated) with Freeport McMoran. 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 Copper has no effect on the direction of Valhi i.e., Valhi and Freeport McMoran go up and down completely randomly.

Pair Corralation between Valhi and Freeport McMoran

Considering the 90-day investment horizon Valhi Inc is expected to under-perform the Freeport McMoran. In addition to that, Valhi is 1.12 times more volatile than Freeport McMoran Copper Gold. It trades about -0.14 of its total potential returns per unit of risk. Freeport McMoran Copper Gold is currently generating about 0.04 per unit of volatility. If you would invest  3,802  in Freeport McMoran Copper Gold on December 28, 2024 and sell it today you would earn a total of  196.00  from holding Freeport McMoran Copper Gold or generate 5.16% return on investment over 90 days.

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

Valhi Inc  vs.  Freeport McMoran Copper Gold

Valhi Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valhi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Freeport McMoran Copper

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Freeport McMoran Copper Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Freeport McMoran may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Valhi and Freeport McMoran

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

The idea behind Valhi Inc and Freeport McMoran Copper Gold 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.