Correlation Between Capital Metals and Falcon Oil

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

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

Diversification Opportunities for Capital Metals and Falcon Oil

0.16

Correlation Coefficient

Capital Metals  Falcon Oil

Average diversification

The 3 months correlation between Capital and Falcon is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Capital Metals PLC and Falcon Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Oil Gas and Capital 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 Capital Metals PLC are associated (or correlated) with Falcon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Oil Gas has no effect on the direction of Capital Metals i.e., Capital Metals and Falcon Oil go up and down completely randomly.

Pair Corralation between Capital Metals and Falcon Oil

Assuming the 90 days trading horizon Capital Metals PLC is expected to under-perform the Falcon Oil. But the stock apears to be less risky and, when comparing its historical volatility, Capital Metals PLC is 1.09 times less risky than Falcon Oil. The stock trades about -0.05 of its potential returns per unit of risk. The Falcon Oil Gas is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  470.00  in Falcon Oil Gas on October 26, 2024 and sell it today you would earn a total of  280.00  from holding Falcon Oil Gas or generate 59.57% return on investment over 90 days.

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

Capital Metals PLC  vs.  Falcon Oil Gas

Capital Metals PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Metals PLC 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 basic 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.

Falcon Oil Gas

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Oil Gas are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Falcon Oil exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital Metals and Falcon Oil

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

The idea behind Capital Metals PLC and Falcon Oil Gas 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.