Correlation Between Kaulin Mfg and Falcon Power

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

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

Diversification Opportunities for Kaulin Mfg and Falcon Power

0.19

Correlation Coefficient

Kaulin Mfg  Falcon Power

Average diversification

The 3 months correlation between Kaulin and Falcon is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Kaulin Mfg and Falcon Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Power and Kaulin Mfg 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 Kaulin Mfg are associated (or correlated) with Falcon Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Power has no effect on the direction of Kaulin Mfg i.e., Kaulin Mfg and Falcon Power go up and down completely randomly.

Pair Corralation between Kaulin Mfg and Falcon Power

Assuming the 90 days trading horizon Kaulin Mfg is expected to under-perform the Falcon Power. But the stock apears to be less risky and, when comparing its historical volatility, Kaulin Mfg is 1.22 times less risky than Falcon Power. The stock trades about -0.16 of its potential returns per unit of risk. The Falcon Power Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,770  in Falcon Power Co on December 4, 2024 and sell it today you would lose (55.00) from holding Falcon Power Co or give up 3.11% of portfolio value over 90 days.

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

Kaulin Mfg  vs.  Falcon Power Co

Kaulin Mfg

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kaulin Mfg has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Falcon Power

Risk-Adjusted Performance

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.

Pair Trading with Kaulin Mfg and Falcon Power

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

The idea behind Kaulin Mfg and Falcon Power 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.