Correlation Between Falcon Metals and First Graphene
Can any of the company-specific risk be diversified away by investing in both Falcon Metals and First Graphene 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 Metals and First Graphene into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Falcon Metals and First Graphene, you can compare the effects of market volatilities on Falcon Metals and First Graphene 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 Metals with a short position of First Graphene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Metals and First Graphene.
Diversification Opportunities for Falcon Metals and First Graphene
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Falcon and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals and First Graphene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Graphene and Falcon Metals 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 Metals are associated (or correlated) with First Graphene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Graphene has no effect on the direction of Falcon Metals i.e., Falcon Metals and First Graphene go up and down completely randomly.
Pair Corralation between Falcon Metals and First Graphene
Assuming the 90 days trading horizon Falcon Metals is expected to generate 0.83 times more return on investment than First Graphene. However, Falcon Metals is 1.21 times less risky than First Graphene. It trades about -0.15 of its potential returns per unit of risk. First Graphene is currently generating about -0.31 per unit of risk. If you would invest 16.00 in Falcon Metals on September 5, 2024 and sell it today you would lose (2.00) from holding Falcon Metals or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Falcon Metals vs. First Graphene
Performance |
| Timeline |
| Falcon Metals |
| First Graphene |
Falcon Metals and First Graphene Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Falcon Metals and First Graphene
The main advantage of trading using opposite Falcon Metals and First Graphene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Metals position performs unexpectedly, First Graphene 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 First Graphene will offset losses from the drop in First Graphene's long position.| Falcon Metals vs. Northern Star Resources | Falcon Metals vs. Sandfire Resources NL | Falcon Metals vs. Aneka Tambang Tbk |
| First Graphene vs. Autosports Group | First Graphene vs. Falcon Metals | First Graphene vs. Homeco Daily Needs | First Graphene vs. Carawine Resources Limited |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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