Correlation Between Ero Copper and Freeport Mcmoran

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Can any of the company-specific risk be diversified away by investing in both Ero Copper 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 Ero Copper and Freeport Mcmoran into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ero Copper Corp and Freeport-Mcmoran, you can compare the effects of market volatilities on Ero Copper 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 Ero Copper with a short position of Freeport Mcmoran. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ero Copper and Freeport Mcmoran.

Diversification Opportunities for Ero Copper and Freeport Mcmoran

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Ero Copper and Freeport is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Ero Copper Corp and Freeport-Mcmoran in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport-Mcmoran and Ero Copper 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 Ero Copper Corp 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 has no effect on the direction of Ero Copper i.e., Ero Copper and Freeport Mcmoran go up and down completely randomly.

Pair Corralation between Ero Copper and Freeport Mcmoran

Considering the 90-day investment horizon Ero Copper Corp is expected to under-perform the Freeport Mcmoran. In addition to that, Ero Copper is 1.15 times more volatile than Freeport-Mcmoran. It trades about -0.08 of its total potential returns per unit of risk. Freeport-Mcmoran is currently generating about -0.06 per unit of volatility. If you would invest  4,171  in Freeport-Mcmoran on March 29, 2022 and sell it today you would lose (1,069)  from holding Freeport-Mcmoran or give up 25.63% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Ero Copper Corp  vs.  Freeport-Mcmoran

 Performance (%) 
      Timeline 
Ero Copper Corp 
Ero Copper Performance
0 of 100
Over the last 90 days Ero Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain quite persistent which may send shares a bit higher in July 2022. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Ero Copper Price Channel

Freeport-Mcmoran 
Freeport Performance
0 of 100
Over the last 90 days Freeport-Mcmoran has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0177
Payout Ratio
0.14
Last Split Factor
2:1
Forward Annual Dividend Rate
0.6
Dividend Date
2022-05-02
Ex Dividend Date
2022-04-13
Last Split Date
2011-02-02

Freeport Price Channel

Ero Copper and Freeport Mcmoran Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Ero Copper and Freeport Mcmoran

The main advantage of trading using opposite Ero Copper and Freeport Mcmoran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ero Copper 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 Ero Copper Corp and Freeport-Mcmoran 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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