Correlation Between Beach Energy and Falcon Metals

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

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

Diversification Opportunities for Beach Energy and Falcon Metals

-0.63

Correlation Coefficient

Beach Energy  Falcon Metals

Excellent diversification

The 3 months correlation between Beach and Falcon is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Beach Energy and Falcon Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Metals and Beach Energy 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 Beach Energy are associated (or correlated) with Falcon Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Metals has no effect on the direction of Beach Energy i.e., Beach Energy and Falcon Metals go up and down completely randomly.

Pair Corralation between Beach Energy and Falcon Metals

Assuming the 90 days trading horizon Beach Energy is expected to generate 6.14 times less return on investment than Falcon Metals. But when comparing it to its historical volatility, Beach Energy is 3.39 times less risky than Falcon Metals. It trades about 0.0 of its potential returns per unit of risk. Falcon Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Falcon Metals on October 4, 2024 and sell it today you would lose (21.00) from holding Falcon Metals or give up 63.64% of portfolio value over 90 days.

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

Beach Energy  vs.  Falcon Metals

Beach Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beach Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Beach Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Falcon Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Beach Energy and Falcon Metals

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

The idea behind Beach Energy and Falcon Metals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.