Correlation Between Oakley Capital and Falcon Oil

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

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

Diversification Opportunities for Oakley Capital and Falcon Oil

0.61

Correlation Coefficient

Oakley Capital  Falcon Oil

Poor diversification

The 3 months correlation between Oakley and Falcon is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Oakley Capital Investments and Falcon Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Oil Gas and Oakley Capital 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 Oakley Capital Investments are associated (or correlated) with Falcon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Oil Gas has no effect on the direction of Oakley Capital i.e., Oakley Capital and Falcon Oil go up and down completely randomly.

Pair Corralation between Oakley Capital and Falcon Oil

Assuming the 90 days trading horizon Oakley Capital Investments is expected to generate 0.55 times more return on investment than Falcon Oil. However, Oakley Capital Investments is 1.81 times less risky than Falcon Oil. It trades about 0.04 of its potential returns per unit of risk. Falcon Oil Gas is currently generating about -0.11 per unit of risk. If you would invest  50,074  in Oakley Capital Investments on September 12, 2024 and sell it today you would earn a total of  1,126  from holding Oakley Capital Investments or generate 2.25% return on investment over 90 days.

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

Oakley Capital Investments  vs.  Falcon Oil Gas

Oakley Capital Inves

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oakley Capital Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Oakley Capital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Oakley Capital and Falcon Oil

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

The idea behind Oakley Capital Investments and Falcon Oil Gas 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.