Correlation Between Falcon Energy and Faction Investment

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

Diversification Opportunities for Falcon Energy and Faction Investment

-0.41

Correlation Coefficient

Falcon Energy  Faction Investment

Very good diversification

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

Pair Corralation between Falcon Energy and Faction Investment

Assuming the 90 days trading horizon Falcon Energy is expected to generate 46.25 times less return on investment than Faction Investment. But when comparing it to its historical volatility, Falcon Energy Materials is 5.76 times less risky than Faction Investment. It trades about 0.02 of its potential returns per unit of risk. Faction Investment Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Faction Investment Group on October 24, 2024 and sell it today you would earn a total of  3.50  from holding Faction Investment Group or generate 233.33% return on investment over 90 days.

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

Falcon Energy Materials  vs.  Faction Investment Group

Falcon Energy Materials

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Energy Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Falcon Energy is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Faction Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Faction Investment Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Faction Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Falcon Energy and Faction Investment

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

The idea behind Falcon Energy Materials and Faction Investment Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.