Correlation Between Freeport McMoran and Cleveland Cliffs
Can any of the company-specific risk be diversified away by investing in both Freeport McMoran and Cleveland Cliffs 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 McMoran and Cleveland Cliffs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freeport McMoran Copper Gold and Cleveland Cliffs, you can compare the effects of market volatilities on Freeport McMoran and Cleveland Cliffs 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 McMoran with a short position of Cleveland Cliffs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport McMoran and Cleveland Cliffs.
Diversification Opportunities for Freeport McMoran and Cleveland Cliffs
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Freeport and Cleveland is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoran Copper Gold and Cleveland Cliffs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleveland Cliffs and Freeport McMoran 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 Copper Gold are associated (or correlated) with Cleveland Cliffs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleveland Cliffs has no effect on the direction of Freeport McMoran i.e., Freeport McMoran and Cleveland Cliffs go up and down completely randomly.
Pair Corralation between Freeport McMoran and Cleveland Cliffs
Considering the 90-day investment horizon Freeport McMoran Copper Gold is expected to generate 0.54 times more return on investment than Cleveland Cliffs. However, Freeport McMoran Copper Gold is 1.84 times less risky than Cleveland Cliffs. It trades about 0.25 of its potential returns per unit of risk. Cleveland Cliffs is currently generating about -0.26 per unit of risk. If you would invest 4,460 in Freeport McMoran Copper Gold on January 26, 2024 and sell it today you would earn a total of 364.00 from holding Freeport McMoran Copper Gold or generate 8.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freeport McMoran Copper Gold vs. Cleveland Cliffs
Performance |
| Timeline |
| Freeport McMoran Copper |
| Cleveland Cliffs |
Freeport McMoran and Cleveland Cliffs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freeport McMoran and Cleveland Cliffs
The main advantage of trading using opposite Freeport McMoran and Cleveland Cliffs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport McMoran position performs unexpectedly, Cleveland Cliffs 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 Cleveland Cliffs will offset losses from the drop in Cleveland Cliffs' long position.| Freeport McMoran vs. Ero Copper Corp | Freeport McMoran vs. Taseko Mines | Freeport McMoran vs. Metals Acquisition Limited | Freeport McMoran vs. Hecla Mining |
| Cleveland Cliffs vs. Nucor Corp | Cleveland Cliffs vs. Steel Dynamics | Cleveland Cliffs vs. ArcelorMittal SA ADR | Cleveland Cliffs vs. Gerdau SA ADR |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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