Correlation Between Falcon Power and Sun Race
Can any of the company-specific risk be diversified away by investing in both Falcon Power and Sun Race 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 Power and Sun Race into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Falcon Power Co and Sun Race Sturmey Archer, you can compare the effects of market volatilities on Falcon Power and Sun Race 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 Power with a short position of Sun Race. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Power and Sun Race.
Diversification Opportunities for Falcon Power and Sun Race
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Falcon and Sun is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Power Co and Sun Race Sturmey Archer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Race Sturmey and Falcon Power 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 Power Co are associated (or correlated) with Sun Race. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Race Sturmey has no effect on the direction of Falcon Power i.e., Falcon Power and Sun Race go up and down completely randomly.
Pair Corralation between Falcon Power and Sun Race
Assuming the 90 days trading horizon Falcon Power Co is expected to generate 1.36 times more return on investment than Sun Race. However, Falcon Power is 1.36 times more volatile than Sun Race Sturmey Archer. It trades about -0.12 of its potential returns per unit of risk. Sun Race Sturmey Archer is currently generating about -0.39 per unit of risk. If you would invest 1,873 in Falcon Power Co on August 30, 2024 and sell it today you would lose (103.00) from holding Falcon Power Co or give up 5.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Falcon Power Co vs. Sun Race Sturmey Archer
Performance |
| Timeline |
| Falcon Power |
| Sun Race Sturmey |
Falcon Power and Sun Race Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Falcon Power and Sun Race
The main advantage of trading using opposite Falcon Power and Sun Race positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Power position performs unexpectedly, Sun Race 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 Sun Race will offset losses from the drop in Sun Race's long position.| Falcon Power vs. Yulon Motor Co | Falcon Power vs. Far Eastern Department | Falcon Power vs. China Steel Corp | Falcon Power vs. Chang Hwa Commercial |
| Sun Race vs. Lee Chi Enterprises | Sun Race vs. Basso Industry Corp | Sun Race vs. Giant Manufacturing Co | Sun Race vs. Merida Industry Co |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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