Correlation Between Falcon Focus and Large Cap

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

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

Diversification Opportunities for Falcon Focus and Large Cap

0.0

Correlation Coefficient

Falcon Focus  Large Cap

Pay attention - limited upside

The 3 months correlation between Falcon and Large is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Focus Scv and Large Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Value and Falcon Focus 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 Focus Scv are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Value has no effect on the direction of Falcon Focus i.e., Falcon Focus and Large Cap go up and down completely randomly.

Pair Corralation between Falcon Focus and Large Cap

If you would invest (100.00) in Falcon Focus Scv on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Falcon Focus Scv or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Falcon Focus Scv  vs.  Large Cap Value

Falcon Focus Scv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Falcon Focus Scv has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Falcon Focus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Large Cap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Large Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Falcon Focus and Large Cap

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

The idea behind Falcon Focus Scv and Large Cap Value 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.