Correlation Between Arbor Metals and Falcon Energy

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

By analyzing existing cross correlation between Arbor Metals Corp and Falcon Energy Materials, you can compare the effects of market volatilities on Arbor Metals and Falcon Energy 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 Arbor Metals with a short position of Falcon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbor Metals and Falcon Energy.

Diversification Opportunities for Arbor Metals and Falcon Energy

-0.65

Correlation Coefficient

Arbor Metals  Falcon Energy

Excellent diversification

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

Pair Corralation between Arbor Metals and Falcon Energy

Assuming the 90 days horizon Arbor Metals Corp is expected to under-perform the Falcon Energy. But the stock apears to be less risky and, when comparing its historical volatility, Arbor Metals Corp is 1.44 times less risky than Falcon Energy. The stock trades about -0.16 of its potential returns per unit of risk. The Falcon Energy Materials is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Falcon Energy Materials on September 5, 2024 and sell it today you would earn a total of  12.00  from holding Falcon Energy Materials or generate 17.65% return on investment over 90 days.

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

Arbor Metals Corp  vs.  Falcon Energy Materials

Arbor Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arbor Metals Corp 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Falcon Energy Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Energy Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Falcon Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arbor Metals and Falcon Energy

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

The idea behind Arbor Metals Corp and Falcon Energy Materials 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.