Correlation Between Sound Energy and Falcon Oil
Can any of the company-specific risk be diversified away by investing in both Sound Energy and Falcon Oil 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 Sound Energy and Falcon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sound Energy plc and Falcon Oil Gas, you can compare the effects of market volatilities on Sound Energy and Falcon Oil 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 Sound Energy with a short position of Falcon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Energy and Falcon Oil.
Diversification Opportunities for Sound Energy and Falcon Oil
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Sound and Falcon is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sound Energy plc and Falcon Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Oil Gas and Sound Energy 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 Sound Energy plc are associated (or correlated) with Falcon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Oil Gas has no effect on the direction of Sound Energy i.e., Sound Energy and Falcon Oil go up and down completely randomly.
Pair Corralation between Sound Energy and Falcon Oil
Assuming the 90 days horizon Sound Energy plc is expected to generate 5.48 times more return on investment than Falcon Oil. However, Sound Energy is 5.48 times more volatile than Falcon Oil Gas. It trades about 0.11 of its potential returns per unit of risk. Falcon Oil Gas is currently generating about 0.08 per unit of risk. 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 |
Sound Energy plc vs. Falcon Oil Gas
Performance |
| Timeline |
| Sound Energy plc |
| Falcon Oil Gas |
Sound Energy and Falcon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sound Energy and Falcon Oil
The main advantage of trading using opposite Sound Energy and Falcon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sound Energy position performs unexpectedly, Falcon Oil 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 Oil will offset losses from the drop in Falcon Oil's long position.| Sound Energy vs. Cgrowth Capital | Sound Energy vs. Energy Revenue Amer | Sound Energy vs. Prairie Provident Resources | Sound Energy vs. MMEX Resources Corp |
| Falcon Oil vs. Gulf Keystone Petroleum | Falcon Oil vs. Maverick Energy Group | Falcon Oil vs. North European Oil | Falcon Oil vs. SandRidge Energy |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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