Correlation Between WT Offshore and Freeport

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

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

Diversification Opportunities for WT Offshore and Freeport

0.64

Correlation Coefficient

WT Offshore  Freeport

Poor diversification

The 3 months correlation between WTI and Freeport is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding WT Offshore and Freeport McMoRan 5 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 5 and WT Offshore 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 WT Offshore 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 5 has no effect on the direction of WT Offshore i.e., WT Offshore and Freeport go up and down completely randomly.

Pair Corralation between WT Offshore and Freeport

Considering the 90-day investment horizon WT Offshore is expected to under-perform the Freeport. In addition to that, WT Offshore is 7.29 times more volatile than Freeport McMoRan 5 percent. It trades about -0.07 of its total potential returns per unit of risk. Freeport McMoRan 5 percent is currently generating about 0.01 per unit of volatility. If you would invest  9,833  in Freeport McMoRan 5 percent on September 28, 2024 and sell it today you would earn a total of  67.00  from holding Freeport McMoRan 5 percent or generate 0.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.26%
Values	Daily Returns

WT Offshore  vs.  Freeport McMoRan 5 percent

WT Offshore

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

Pair Trading with WT Offshore and Freeport

The main advantage of trading using opposite WT Offshore and Freeport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WT Offshore 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 WT Offshore and Freeport McMoRan 5 percent 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.