Correlation Between Falcon Energy and Information Services

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

Diversification Opportunities for Falcon Energy and Information Services

-0.06

Correlation Coefficient

Falcon Energy  Information Services

Good diversification

The 3 months correlation between Falcon and Information is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Energy Materials and Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Falcon Energy i.e., Falcon Energy and Information Services go up and down completely randomly.

Pair Corralation between Falcon Energy and Information Services

Assuming the 90 days trading horizon Falcon Energy Materials is expected to under-perform the Information Services. In addition to that, Falcon Energy is 3.64 times more volatile than Information Services. It trades about -0.24 of its total potential returns per unit of risk. Information Services is currently generating about -0.16 per unit of volatility. If you would invest  2,756  in Information Services on October 6, 2024 and sell it today you would lose (95.00) from holding Information Services or give up 3.45% of portfolio value over 90 days.

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

Falcon Energy Materials  vs.  Information Services

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.

Information Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Information Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Information Services is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Falcon Energy and Information Services

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

The idea behind Falcon Energy Materials and Information Services 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 CEOs Directory module to screen CEOs from public companies around the world.