Correlation Between Falcon Energy and Canaf Investments

Can any of the company-specific risk be diversified away by investing in both Falcon Energy and Canaf 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 Canaf 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 Canaf Investments, you can compare the effects of market volatilities on Falcon Energy and Canaf 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 Canaf Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Energy and Canaf Investments.

Diversification Opportunities for Falcon Energy and Canaf Investments

0.29

Correlation Coefficient

Falcon Energy  Canaf Investments

Modest diversification

The 3 months correlation between Falcon and Canaf is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Energy Materials and Canaf Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaf 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 Canaf Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canaf Investments has no effect on the direction of Falcon Energy i.e., Falcon Energy and Canaf Investments go up and down completely randomly.

Pair Corralation between Falcon Energy and Canaf Investments

Assuming the 90 days trading horizon Falcon Energy Materials is expected to under-perform the Canaf Investments. In addition to that, Falcon Energy is 1.27 times more volatile than Canaf Investments. It trades about -0.04 of its total potential returns per unit of risk. Canaf Investments is currently generating about 0.03 per unit of volatility. If you would invest  29.00  in Canaf Investments on December 23, 2024 and sell it today you would earn a total of  1.00  from holding Canaf Investments or generate 3.45% return on investment over 90 days.

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

Falcon Energy Materials  vs.  Canaf Investments

Falcon Energy Materials

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Canaf Investments

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canaf Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Canaf Investments may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Falcon Energy and Canaf Investments

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

The idea behind Falcon Energy Materials and Canaf 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..