Correlation Between Falcon Oil and US Energy
Can any of the company-specific risk be diversified away by investing in both Falcon Oil and US 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 US 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 US Energy Corp, you can compare the effects of market volatilities on Falcon Oil and US 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 US Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Oil and US Energy.
Diversification Opportunities for Falcon Oil and US Energy
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Falcon and USEG is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Oil Gas and US Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Energy Corp 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 US Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Energy Corp has no effect on the direction of Falcon Oil i.e., Falcon Oil and US Energy go up and down completely randomly.
Pair Corralation between Falcon Oil and US Energy
Assuming the 90 days horizon Falcon Oil is expected to generate 3.05 times less return on investment than US Energy. But when comparing it to its historical volatility, Falcon Oil Gas is 1.06 times less risky than US Energy. It trades about 0.08 of its potential returns per unit of risk. US Energy Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 98.00 in US Energy Corp on October 24, 2024 and sell it today you would earn a total of 281.00 from holding US Energy Corp or generate 286.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Falcon Oil Gas vs. US Energy Corp
Performance |
| Timeline |
| Falcon Oil Gas |
| US Energy Corp |
Falcon Oil and US Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Falcon Oil and US Energy
The main advantage of trading using opposite Falcon Oil and US Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Oil position performs unexpectedly, US 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 US Energy will offset losses from the drop in US 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 |
| US Energy vs. PEDEVCO Corp | US Energy vs. Houston American Energy | US Energy vs. PHX Minerals | US Energy vs. Trio Petroleum 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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