Correlation Between Falcon Energy and TMX Group

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

Diversification Opportunities for Falcon Energy and TMX Group

0.37

Correlation Coefficient

Falcon Energy  TMX Group

Weak diversification

The 3 months correlation between Falcon and TMX is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Energy Materials and TMX Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMX Group Limited 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 TMX Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMX Group Limited has no effect on the direction of Falcon Energy i.e., Falcon Energy and TMX Group go up and down completely randomly.

Pair Corralation between Falcon Energy and TMX Group

Assuming the 90 days trading horizon Falcon Energy Materials is expected to under-perform the TMX Group. In addition to that, Falcon Energy is 4.7 times more volatile than TMX Group Limited. It trades about -0.47 of its total potential returns per unit of risk. TMX Group Limited is currently generating about 0.06 per unit of volatility. If you would invest  4,402  in TMX Group Limited on September 26, 2024 and sell it today you would earn a total of  46.00  from holding TMX Group Limited or generate 1.04% 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.  TMX Group Limited

Falcon Energy Materials

Risk-Adjusted Performance

0 of 100

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 recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

TMX Group Limited

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TMX Group Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TMX Group 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 TMX Group

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

The idea behind Falcon Energy Materials and TMX Group Limited 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.