Correlation Between Freeport Mcmoran and Ero Copper

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

Diversification Opportunities for Freeport Mcmoran and Ero Copper

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Freeport and Ero Copper is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Freeport-Mcmoran and Ero Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ero Copper Corp 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 are associated (or correlated) with Ero Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ero Copper Corp has no effect on the direction of Freeport Mcmoran i.e., Freeport Mcmoran and Ero Copper go up and down completely randomly.

Pair Corralation between Freeport Mcmoran and Ero Copper

Considering the 90-day investment horizon Freeport-Mcmoran is expected to generate 0.9 times more return on investment than Ero Copper. However, Freeport-Mcmoran is 1.11 times less risky than Ero Copper. It trades about 0.01 of its potential returns per unit of risk. Ero Copper Corp is currently generating about -0.01 per unit of risk. If you would invest  3,340  in Freeport-Mcmoran on July 6, 2022 and sell it today you would lose (262.00)  from holding Freeport-Mcmoran or give up 7.84% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Freeport-Mcmoran  vs.  Ero Copper Corp

 Performance (%) 
       Timeline  
Freeport-Mcmoran 
Freeport Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Freeport-Mcmoran are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental indicators, Freeport Mcmoran may actually be approaching a critical reversion point that can send shares even higher in November 2022.

Freeport Price Channel

Ero Copper Corp 
Ero Copper Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ero Copper Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Ero Copper disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ero Copper Price Channel

Freeport Mcmoran and Ero Copper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Freeport Mcmoran and Ero Copper

The main advantage of trading using opposite Freeport Mcmoran and Ero Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport Mcmoran position performs unexpectedly, Ero Copper 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 Ero Copper will offset losses from the drop in Ero Copper's long position.
Freeport Mcmoran vs. Amazon Inc
The idea behind Freeport-Mcmoran and Ero Copper Corp 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.
Ero Copper vs. Microsoft Corp
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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