Correlation Between A W and Falcon Energy

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

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

Diversification Opportunities for A W and Falcon Energy

0.39

Correlation Coefficient

A W  Falcon Energy

Weak diversification

The 3 months correlation between A W and Falcon is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding A W FOOD 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 A W 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 A W FOOD 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 A W i.e., A W and Falcon Energy go up and down completely randomly.

Pair Corralation between A W and Falcon Energy

Assuming the 90 days horizon A W FOOD is expected to generate 0.33 times more return on investment than Falcon Energy. However, A W FOOD is 3.04 times less risky than Falcon Energy. It trades about -0.04 of its potential returns per unit of risk. Falcon Energy Materials is currently generating about -0.05 per unit of risk. If you would invest  3,512  in A W FOOD on December 28, 2024 and sell it today you would lose (162.00) from holding A W FOOD or give up 4.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

A W FOOD  vs.  Falcon Energy Materials

A W FOOD

Risk-Adjusted Performance

Very Weak

Over the last 90 days A W FOOD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, A W is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Falcon Energy Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Falcon Energy Materials 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 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.

Pair Trading with A W and Falcon Energy

The main advantage of trading using opposite A W and Falcon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if A W 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 A W FOOD 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .