Correlation Between Falcon Metals and Centaurus Metals

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

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

Diversification Opportunities for Falcon Metals and Centaurus Metals

0.85

Correlation Coefficient

Falcon Metals  Centaurus Metals

Very poor diversification

The 3 months correlation between Falcon and Centaurus is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals and Centaurus Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaurus Metals 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 Centaurus Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaurus Metals has no effect on the direction of Falcon Metals i.e., Falcon Metals and Centaurus Metals go up and down completely randomly.

Pair Corralation between Falcon Metals and Centaurus Metals

Assuming the 90 days trading horizon Falcon Metals is expected to generate 1.33 times less return on investment than Centaurus Metals. In addition to that, Falcon Metals is 1.13 times more volatile than Centaurus Metals. It trades about 0.13 of its total potential returns per unit of risk. Centaurus Metals is currently generating about 0.19 per unit of volatility. If you would invest  33.00  in Centaurus Metals on October 22, 2024 and sell it today you would earn a total of  4.00  from holding Centaurus Metals or generate 12.12% return on investment over 90 days.

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

Falcon Metals  vs.  Centaurus Metals

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.

Centaurus Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centaurus 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 primary 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 Falcon Metals and Centaurus Metals

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

The idea behind Falcon Metals and Centaurus 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.