Correlation Between Brompton Energy and Falcon Energy

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

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

Diversification Opportunities for Brompton Energy and Falcon Energy

0.38

Correlation Coefficient

Brompton Energy  Falcon Energy

Weak diversification

The 3 months correlation between Brompton and Falcon is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Energy Split 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 Brompton 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 Brompton Energy Split 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 Brompton Energy i.e., Brompton Energy and Falcon Energy go up and down completely randomly.

Pair Corralation between Brompton Energy and Falcon Energy

Assuming the 90 days trading horizon Brompton Energy Split is expected to generate 0.86 times more return on investment than Falcon Energy. However, Brompton Energy Split is 1.17 times less risky than Falcon Energy. It trades about 0.1 of its potential returns per unit of risk. Falcon Energy Materials is currently generating about -0.04 per unit of risk. If you would invest  501.00  in Brompton Energy Split on October 7, 2024 and sell it today you would earn a total of  69.00  from holding Brompton Energy Split or generate 13.77% return on investment over 90 days.

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

Brompton Energy Split  vs.  Falcon Energy Materials

Brompton Energy Split

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Energy Split are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Brompton Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Falcon Energy Materials

Risk-Adjusted Performance

0 of 100

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 fairly stable fundamental indicators, Falcon Energy 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 Brompton Energy and Falcon Energy

The main advantage of trading using opposite Brompton Energy and Falcon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton Energy 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 Brompton Energy Split 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.