Correlation Between Falcon Energy and Western Investment

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

Diversification Opportunities for Falcon Energy and Western Investment

-0.5

Correlation Coefficient

Falcon Energy  Western Investment

Very good diversification

The 3 months correlation between Falcon and Western is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Energy Materials and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western 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 Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Falcon Energy i.e., Falcon Energy and Western Investment go up and down completely randomly.

Pair Corralation between Falcon Energy and Western Investment

Assuming the 90 days trading horizon Falcon Energy Materials is expected to under-perform the Western Investment. In addition to that, Falcon Energy is 1.53 times more volatile than Western Investment. It trades about -0.32 of its total potential returns per unit of risk. Western Investment is currently generating about 0.51 per unit of volatility. If you would invest  46.00  in Western Investment on October 9, 2024 and sell it today you would earn a total of  16.00  from holding Western Investment or generate 34.78% 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.  Western Investment

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

Western Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Western Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Falcon Energy and Western Investment

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

The idea behind Falcon Energy Materials and Western Investment 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.