Correlation Between Falcon Metals and Sky Metals
Can any of the company-specific risk be diversified away by investing in both Falcon Metals and Sky Metals 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 Sky Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Falcon Metals and Sky Metals, you can compare the effects of market volatilities on Falcon Metals and Sky Metals 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 Sky Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Metals and Sky Metals.
Diversification Opportunities for Falcon Metals and Sky Metals
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Falcon and Sky is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals and Sky Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Metals 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 Sky Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Metals has no effect on the direction of Falcon Metals i.e., Falcon Metals and Sky Metals go up and down completely randomly.
Pair Corralation between Falcon Metals and Sky Metals
Assuming the 90 days trading horizon Falcon Metals is expected to generate 2.52 times more return on investment than Sky Metals. However, Falcon Metals is 2.52 times more volatile than Sky Metals. It trades about 0.02 of its potential returns per unit of risk. Sky Metals is currently generating about 0.01 per unit of risk. If you would invest 13.00 in Falcon Metals on October 17, 2024 and sell it today you would earn a total of 0.00 from holding Falcon Metals or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Falcon Metals vs. Sky Metals
Performance |
| Timeline |
| Falcon Metals |
| Sky Metals |
Falcon Metals and Sky Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Falcon Metals and Sky Metals
The main advantage of trading using opposite Falcon Metals and Sky Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Metals position performs unexpectedly, Sky Metals 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 Sky Metals will offset losses from the drop in Sky Metals' long position.| Falcon Metals vs. Sandon Capital Investments | Falcon Metals vs. Aurelia Metals | Falcon Metals vs. MFF Capital Investments | Falcon Metals vs. Hotel Property Investments |
| Sky Metals vs. Retail Food Group | Sky Metals vs. Skycity Entertainment Group | Sky Metals vs. ARN Media Limited | Sky Metals vs. Step One Clothing |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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