Correlation Between Lion One and Falcon Energy

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

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

Diversification Opportunities for Lion One and Falcon Energy

0.06

Correlation Coefficient

Lion One  Falcon Energy

Significant diversification

The 3 months correlation between Lion and Falcon is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals 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 Lion One 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 Lion One Metals 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 Lion One i.e., Lion One and Falcon Energy go up and down completely randomly.

Pair Corralation between Lion One and Falcon Energy

Assuming the 90 days horizon Lion One Metals is expected to generate 1.32 times more return on investment than Falcon Energy. However, Lion One is 1.32 times more volatile than Falcon Energy Materials. It trades about 0.11 of its potential returns per unit of risk. Falcon Energy Materials is currently generating about -0.05 per unit of risk. If you would invest  23.00  in Lion One Metals on December 29, 2024 and sell it today you would earn a total of  9.00  from holding Lion One Metals or generate 39.13% return on investment over 90 days.

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

Lion One Metals  vs.  Falcon Energy Materials

Lion One Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lion One Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lion One showed solid returns over the last few months and may actually be approaching a breakup point.

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 weak 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 Lion One and Falcon Energy

The main advantage of trading using opposite Lion One and Falcon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion One 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 Lion One Metals 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.