Correlation Between Falcon Oil and K3 Business

Can any of the company-specific risk be diversified away by investing in both Falcon Oil and K3 Business 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 Oil and K3 Business into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Falcon Oil Gas and K3 Business Technology, you can compare the effects of market volatilities on Falcon Oil and K3 Business 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 Oil with a short position of K3 Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Oil and K3 Business.

Diversification Opportunities for Falcon Oil and K3 Business

0.73

Correlation Coefficient

Falcon Oil  K3 Business

Poor diversification

The 3 months correlation between Falcon and KBT is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Oil Gas and K3 Business Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K3 Business Technology and Falcon Oil 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 Oil Gas are associated (or correlated) with K3 Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K3 Business Technology has no effect on the direction of Falcon Oil i.e., Falcon Oil and K3 Business go up and down completely randomly.

Pair Corralation between Falcon Oil and K3 Business

Assuming the 90 days trading horizon Falcon Oil Gas is expected to under-perform the K3 Business. In addition to that, Falcon Oil is 1.54 times more volatile than K3 Business Technology. It trades about -0.21 of its total potential returns per unit of risk. K3 Business Technology is currently generating about -0.17 per unit of volatility. If you would invest  7,100  in K3 Business Technology on August 30, 2024 and sell it today you would lose (950.00) from holding K3 Business Technology or give up 13.38% of portfolio value over 90 days.

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

Falcon Oil Gas  vs.  K3 Business Technology

Falcon Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

K3 Business Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days K3 Business Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Falcon Oil and K3 Business

The main advantage of trading using opposite Falcon Oil and K3 Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Oil position performs unexpectedly, K3 Business 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 K3 Business will offset losses from the drop in K3 Business' long position.

The idea behind Falcon Oil Gas and K3 Business Technology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.