Correlation Between Falcon Metals and Step One

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

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

Diversification Opportunities for Falcon Metals and Step One

0.65

Correlation Coefficient

Falcon Metals  Step One

Poor diversification

The 3 months correlation between Falcon and Step is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals and Step One Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Step One Clothing 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 Step One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Step One Clothing has no effect on the direction of Falcon Metals i.e., Falcon Metals and Step One go up and down completely randomly.

Pair Corralation between Falcon Metals and Step One

Assuming the 90 days trading horizon Falcon Metals is expected to under-perform the Step One. But the stock apears to be less risky and, when comparing its historical volatility, Falcon Metals is 1.44 times less risky than Step One. The stock trades about -0.28 of its potential returns per unit of risk. The Step One Clothing is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  122.00  in Step One Clothing on December 4, 2024 and sell it today you would lose (24.00) from holding Step One Clothing or give up 19.67% of portfolio value over 90 days.

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

Falcon Metals  vs.  Step One Clothing

Falcon Metals

Risk-Adjusted Performance

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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Step One Clothing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Step One Clothing 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 April 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 Step One

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

The idea behind Falcon Metals and Step One Clothing 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.