Correlation Between Falcon Metals and ASX

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

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

Diversification Opportunities for Falcon Metals and ASX

-0.38

Correlation Coefficient

Falcon Metals  ASX

Very good diversification

The 3 months correlation between Falcon and ASX is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals and ASX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX and Falcon 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 Falcon Metals are associated (or correlated) with ASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX has no effect on the direction of Falcon Metals i.e., Falcon Metals and ASX go up and down completely randomly.

Pair Corralation between Falcon Metals and ASX

Assuming the 90 days trading horizon Falcon Metals is expected to generate 4.58 times more return on investment than ASX. However, Falcon Metals is 4.58 times more volatile than ASX. It trades about 0.09 of its potential returns per unit of risk. ASX is currently generating about 0.03 per unit of risk. If you would invest  12.00  in Falcon Metals on December 21, 2024 and sell it today you would earn a total of  3.00  from holding Falcon Metals or generate 25.0% return on investment over 90 days.

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

Falcon Metals  vs.  ASX

Falcon Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Falcon Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

ASX

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ASX are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ASX is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Falcon Metals and ASX

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

The idea behind Falcon Metals and ASX 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.