Correlation Between Falcon Oil and Sound Energy
Can any of the company-specific risk be diversified away by investing in both Falcon Oil and Sound 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 Falcon Oil and Sound Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Falcon Oil Gas and Sound Energy plc, you can compare the effects of market volatilities on Falcon Oil and Sound 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 Falcon Oil with a short position of Sound Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Oil and Sound Energy.
Diversification Opportunities for Falcon Oil and Sound Energy
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Falcon and Sound is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Oil Gas and Sound Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Energy plc and Falcon Oil 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 Oil Gas are associated (or correlated) with Sound Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Energy plc has no effect on the direction of Falcon Oil i.e., Falcon Oil and Sound Energy go up and down completely randomly.
Pair Corralation between Falcon Oil and Sound Energy
Assuming the 90 days horizon Falcon Oil is expected to generate 8.05 times less return on investment than Sound Energy. But when comparing it to its historical volatility, Falcon Oil Gas is 5.48 times less risky than Sound Energy. It trades about 0.08 of its potential returns per unit of risk. Sound Energy plc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 0.41 in Sound Energy plc on October 24, 2024 and sell it today you would earn a total of 2.23 from holding Sound Energy plc or generate 543.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.29% |
| Values | Daily Returns |
Falcon Oil Gas vs. Sound Energy plc
Performance |
| Timeline |
| Falcon Oil Gas |
| Sound Energy plc |
Falcon Oil and Sound Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Falcon Oil and Sound Energy
The main advantage of trading using opposite Falcon Oil and Sound Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Oil position performs unexpectedly, Sound 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 Sound Energy will offset losses from the drop in Sound Energy's long position.| Falcon Oil vs. Gulf Keystone Petroleum | Falcon Oil vs. Maverick Energy Group | Falcon Oil vs. North European Oil | Falcon Oil vs. SandRidge Energy |
| Sound Energy vs. Cgrowth Capital | Sound Energy vs. Energy Revenue Amer | Sound Energy vs. Prairie Provident Resources | Sound Energy vs. MMEX Resources Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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