Correlation Between Falcon Metals and Metals X

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

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

Diversification Opportunities for Falcon Metals and Metals X

0.54

Correlation Coefficient

Falcon Metals  Metals X

Very weak diversification

The 3 months correlation between Falcon and Metals is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals and Metals X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals X 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 Metals X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals X has no effect on the direction of Falcon Metals i.e., Falcon Metals and Metals X go up and down completely randomly.

Pair Corralation between Falcon Metals and Metals X

Assuming the 90 days trading horizon Falcon Metals is expected to under-perform the Metals X. In addition to that, Falcon Metals is 1.88 times more volatile than Metals X. It trades about -0.13 of its total potential returns per unit of risk. Metals X is currently generating about -0.18 per unit of volatility. If you would invest  50.00  in Metals X on October 6, 2024 and sell it today you would lose (9.00) from holding Metals X or give up 18.0% of portfolio value over 90 days.

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

Falcon Metals  vs.  Metals X

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 weak 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.

Metals X

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metals X has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Falcon Metals and Metals X

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

The idea behind Falcon Metals and Metals X 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.