Correlation Between Falcon Oil and LBG Media

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

Diversification Opportunities for Falcon Oil and LBG Media

0.65

Correlation Coefficient

Falcon Oil  LBG Media

Poor diversification

The 3 months correlation between Falcon and LBG is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Oil Gas and LBG Media PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBG Media PLC 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 LBG Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LBG Media PLC has no effect on the direction of Falcon Oil i.e., Falcon Oil and LBG Media go up and down completely randomly.

Pair Corralation between Falcon Oil and LBG Media

Assuming the 90 days trading horizon Falcon Oil Gas is expected to under-perform the LBG Media. But the stock apears to be less risky and, when comparing its historical volatility, Falcon Oil Gas is 1.04 times less risky than LBG Media. The stock trades about -0.06 of its potential returns per unit of risk. The LBG Media PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  12,600  in LBG Media PLC on September 25, 2024 and sell it today you would earn a total of  400.00  from holding LBG Media PLC or generate 3.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Falcon Oil Gas  vs.  LBG Media PLC

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

LBG Media PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LBG Media PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, LBG Media is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Falcon Oil and LBG Media

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

The idea behind Falcon Oil Gas and LBG Media PLC 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.