Correlation Between X FAB and Freeport

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

By analyzing existing cross correlation between X FAB Silicon Foundries and Freeport McMoRan 54 percent, you can compare the effects of market volatilities on X FAB 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 X FAB with a short position of Freeport. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Freeport.

Diversification Opportunities for X FAB and Freeport

0.23

Correlation Coefficient

X FAB  Freeport

Modest diversification

The 3 months correlation between XFABF and Freeport is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Freeport McMoRan 54 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and X FAB 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 X FAB Silicon Foundries 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 has no effect on the direction of X FAB i.e., X FAB and Freeport go up and down completely randomly.

Pair Corralation between X FAB and Freeport

Assuming the 90 days horizon X FAB Silicon Foundries is expected to under-perform the Freeport. In addition to that, X FAB is 4.36 times more volatile than Freeport McMoRan 54 percent. It trades about -0.14 of its total potential returns per unit of risk. Freeport McMoRan 54 percent is currently generating about -0.47 per unit of volatility. If you would invest  10,160  in Freeport McMoRan 54 percent on October 6, 2024 and sell it today you would lose (347.00) from holding Freeport McMoRan 54 percent or give up 3.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

X FAB Silicon Foundries  vs.  Freeport McMoRan 54 percent

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Freeport McMoRan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 54 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with X FAB and Freeport

The main advantage of trading using opposite X FAB and Freeport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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 X FAB Silicon Foundries and Freeport McMoRan 54 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.