Correlation Between Falcon Energy and Brookfield Investments

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

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

Diversification Opportunities for Falcon Energy and Brookfield Investments

0.41

Correlation Coefficient

Falcon Energy  Brookfield Investments

Very weak diversification

The 3 months correlation between Falcon and Brookfield is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Energy Materials and Brookfield Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Investments and Falcon Energy 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 Energy Materials are associated (or correlated) with Brookfield Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Investments has no effect on the direction of Falcon Energy i.e., Falcon Energy and Brookfield Investments go up and down completely randomly.

Pair Corralation between Falcon Energy and Brookfield Investments

Assuming the 90 days trading horizon Falcon Energy Materials is expected to generate 11.06 times more return on investment than Brookfield Investments. However, Falcon Energy is 11.06 times more volatile than Brookfield Investments. It trades about 0.0 of its potential returns per unit of risk. Brookfield Investments is currently generating about 0.02 per unit of risk. If you would invest  66.00  in Falcon Energy Materials on October 5, 2024 and sell it today you would lose (3.00) from holding Falcon Energy Materials or give up 4.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	56.67%
Values	Daily Returns

Falcon Energy Materials  vs.  Brookfield Investments

Falcon Energy Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Energy Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Falcon Energy is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Brookfield Investments

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Brookfield Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Brookfield Investments is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Falcon Energy and Brookfield Investments

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

The idea behind Falcon Energy Materials and Brookfield Investments 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.