Correlation Between Falcon Gold and Puma Exploration

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

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

Diversification Opportunities for Falcon Gold and Puma Exploration

-0.2

Correlation Coefficient

Falcon Gold  Puma Exploration

Good diversification

The 3 months correlation between Falcon and Puma is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Gold Corp and Puma Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puma Exploration and Falcon Gold 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 Gold Corp are associated (or correlated) with Puma Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puma Exploration has no effect on the direction of Falcon Gold i.e., Falcon Gold and Puma Exploration go up and down completely randomly.

Pair Corralation between Falcon Gold and Puma Exploration

Assuming the 90 days horizon Falcon Gold is expected to generate 5.33 times less return on investment than Puma Exploration. In addition to that, Falcon Gold is 1.44 times more volatile than Puma Exploration. It trades about 0.02 of its total potential returns per unit of risk. Puma Exploration is currently generating about 0.12 per unit of volatility. If you would invest  4.00  in Puma Exploration on September 4, 2024 and sell it today you would earn a total of  2.00  from holding Puma Exploration or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Falcon Gold Corp  vs.  Puma Exploration

Falcon Gold Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Gold Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Falcon Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Puma Exploration

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Puma Exploration are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Puma Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Falcon Gold and Puma Exploration

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

The idea behind Falcon Gold Corp and Puma Exploration 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 Transaction History module to view history of all your transactions and understand their impact on performance.