Correlation Between Plaza Retail and Falcon Energy

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

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

Diversification Opportunities for Plaza Retail and Falcon Energy

0.55

Correlation Coefficient

Plaza Retail  Falcon Energy

Very weak diversification

The 3 months correlation between Plaza and Falcon is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Plaza Retail REIT 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 Plaza Retail 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 Plaza Retail REIT 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 Plaza Retail i.e., Plaza Retail and Falcon Energy go up and down completely randomly.

Pair Corralation between Plaza Retail and Falcon Energy

Assuming the 90 days trading horizon Plaza Retail REIT is expected to under-perform the Falcon Energy. But the stock apears to be less risky and, when comparing its historical volatility, Plaza Retail REIT is 7.12 times less risky than Falcon Energy. The stock trades about -0.18 of its potential returns per unit of risk. The Falcon Energy Materials is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  73.00  in Falcon Energy Materials on October 14, 2024 and sell it today you would lose (10.00) from holding Falcon Energy Materials or give up 13.7% of portfolio value over 90 days.

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

Plaza Retail REIT  vs.  Falcon Energy Materials

Plaza Retail REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plaza Retail REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Falcon Energy Materials

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Plaza Retail and Falcon Energy

The main advantage of trading using opposite Plaza Retail and Falcon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plaza Retail 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 Plaza Retail REIT 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.