Correlation Between Falcon Energy and Lion One

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

Diversification Opportunities for Falcon Energy and Lion One

0.06

Correlation Coefficient

Falcon Energy  Lion One

Significant diversification

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

Pair Corralation between Falcon Energy and Lion One

Assuming the 90 days trading horizon Falcon Energy Materials is expected to under-perform the Lion One. But the stock apears to be less risky and, when comparing its historical volatility, Falcon Energy Materials is 1.32 times less risky than Lion One. The stock trades about -0.05 of its potential returns per unit of risk. The Lion One Metals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Lion One Metals on December 29, 2024 and sell it today you would earn a total of  9.00  from holding Lion One Metals or generate 39.13% return on investment over 90 days.

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

Falcon Energy Materials  vs.  Lion One Metals

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 weak 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.

Lion One Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lion One Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lion One showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Falcon Energy and Lion One

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

The idea behind Falcon Energy Materials and Lion One Metals 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.