Correlation Between First National and Falcon Energy

Can any of the company-specific risk be diversified away by investing in both First National and Falcon Energy 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 First National and Falcon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First National Financial and Falcon Energy Materials, you can compare the effects of market volatilities on First National and Falcon Energy 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 First National with a short position of Falcon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of First National and Falcon Energy.

Diversification Opportunities for First National and Falcon Energy

-0.34

Correlation Coefficient

First National  Falcon Energy

Very good diversification

The 3 months correlation between First and Falcon is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Falcon Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Energy Materials and First National 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 First National Financial are associated (or correlated) with Falcon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Energy Materials has no effect on the direction of First National i.e., First National and Falcon Energy go up and down completely randomly.

Pair Corralation between First National and Falcon Energy

Assuming the 90 days trading horizon First National Financial is expected to generate 0.34 times more return on investment than Falcon Energy. However, First National Financial is 2.95 times less risky than Falcon Energy. It trades about 0.03 of its potential returns per unit of risk. Falcon Energy Materials is currently generating about -0.09 per unit of risk. If you would invest  1,480  in First National Financial on December 2, 2024 and sell it today you would earn a total of  35.00  from holding First National Financial or generate 2.36% return on investment over 90 days.

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

First National Financial  vs.  Falcon Energy Materials

First National Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First National is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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 abnormal 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.

Pair Trading with First National and Falcon Energy

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

The idea behind First National Financial and Falcon Energy Materials 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.