Correlation Between High Liner and Falcon Energy
Can any of the company-specific risk be diversified away by investing in both High Liner and Falcon 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 High Liner and Falcon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Liner Foods and Falcon Energy Materials, you can compare the effects of market volatilities on High Liner and Falcon 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 High Liner with a short position of Falcon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Liner and Falcon Energy.
Diversification Opportunities for High Liner and Falcon Energy
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between High and Falcon is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding High Liner Foods and Falcon Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Energy Materials and High Liner 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 High Liner Foods are associated (or correlated) with Falcon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Energy Materials has no effect on the direction of High Liner i.e., High Liner and Falcon Energy go up and down completely randomly.
Pair Corralation between High Liner and Falcon Energy
Assuming the 90 days trading horizon High Liner is expected to generate 2.53 times less return on investment than Falcon Energy. But when comparing it to its historical volatility, High Liner Foods is 2.67 times less risky than Falcon Energy. It trades about 0.15 of its potential returns per unit of risk. Falcon Energy Materials is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 65.00 in Falcon Energy Materials on August 28, 2024 and sell it today you would earn a total of 24.00 from holding Falcon Energy Materials or generate 36.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Liner Foods vs. Falcon Energy Materials
Performance |
| Timeline |
| High Liner Foods |
| Falcon Energy Materials |
High Liner and Falcon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Liner and Falcon Energy
The main advantage of trading using opposite High Liner and Falcon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Liner position performs unexpectedly, Falcon 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 Falcon Energy will offset losses from the drop in Falcon Energy's long position.| High Liner vs. Leons Furniture Limited | High Liner vs. Autocanada | High Liner vs. Maple Leaf Foods | High Liner vs. Premium Brands Holdings |
| Falcon Energy vs. NeXGold Mining Corp | Falcon Energy vs. US Financial 15 | Falcon Energy vs. Metalero Mining Corp | Falcon Energy vs. CI Financial 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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