Correlation Between Falcon Power and Awea Mechantronic

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

By analyzing existing cross correlation between Falcon Power Co and Awea Mechantronic Co, you can compare the effects of market volatilities on Falcon Power and Awea Mechantronic 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 Falcon Power with a short position of Awea Mechantronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Power and Awea Mechantronic.

Diversification Opportunities for Falcon Power and Awea Mechantronic

0.71

Correlation Coefficient

Falcon Power  Awea Mechantronic

Poor diversification

The 3 months correlation between Falcon and Awea is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Power Co and Awea Mechantronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awea Mechantronic and Falcon Power 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 Falcon Power Co are associated (or correlated) with Awea Mechantronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awea Mechantronic has no effect on the direction of Falcon Power i.e., Falcon Power and Awea Mechantronic go up and down completely randomly.

Pair Corralation between Falcon Power and Awea Mechantronic

Assuming the 90 days trading horizon Falcon Power Co is expected to under-perform the Awea Mechantronic. In addition to that, Falcon Power is 1.59 times more volatile than Awea Mechantronic Co. It trades about 0.0 of its total potential returns per unit of risk. Awea Mechantronic Co is currently generating about 0.02 per unit of volatility. If you would invest  2,953  in Awea Mechantronic Co on October 7, 2024 and sell it today you would earn a total of  202.00  from holding Awea Mechantronic Co or generate 6.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Falcon Power Co  vs.  Awea Mechantronic Co

Falcon Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Power Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Falcon Power is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Awea Mechantronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Awea Mechantronic Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Awea Mechantronic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Falcon Power and Awea Mechantronic

The main advantage of trading using opposite Falcon Power and Awea Mechantronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Power position performs unexpectedly, Awea Mechantronic 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 Awea Mechantronic will offset losses from the drop in Awea Mechantronic's long position.

The idea behind Falcon Power Co and Awea Mechantronic Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.