Correlation Between Rubicon Organics and Falcon Energy

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

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

Diversification Opportunities for Rubicon Organics and Falcon Energy

-0.64

Correlation Coefficient

Rubicon Organics  Falcon Energy

Excellent diversification

The 3 months correlation between Rubicon and Falcon is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Rubicon Organics 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 Rubicon Organics 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 Rubicon Organics 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 Rubicon Organics i.e., Rubicon Organics and Falcon Energy go up and down completely randomly.

Pair Corralation between Rubicon Organics and Falcon Energy

Assuming the 90 days trading horizon Rubicon Organics is expected to generate 1.21 times more return on investment than Falcon Energy. However, Rubicon Organics is 1.21 times more volatile than Falcon Energy Materials. It trades about 0.05 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  48.00  in Rubicon Organics on December 30, 2024 and sell it today you would earn a total of  4.00  from holding Rubicon Organics or generate 8.33% return on investment over 90 days.

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

Rubicon Organics  vs.  Falcon Energy Materials

Rubicon Organics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rubicon Organics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Rubicon Organics 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 abnormal 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 Rubicon Organics and Falcon Energy

The main advantage of trading using opposite Rubicon Organics and Falcon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rubicon Organics 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 Rubicon Organics 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.