Correlation Between Falcon Metals and Australian Strategic

Can any of the company-specific risk be diversified away by investing in both Falcon Metals and Australian Strategic 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 Australian Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Falcon Metals and Australian Strategic Materials, you can compare the effects of market volatilities on Falcon Metals and Australian Strategic 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 Australian Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Metals and Australian Strategic.

Diversification Opportunities for Falcon Metals and Australian Strategic

0.69

Correlation Coefficient

Falcon Metals  Australian Strategic

Poor diversification

The 3 months correlation between Falcon and Australian is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals and Australian Strategic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Strategic 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 Australian Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Strategic has no effect on the direction of Falcon Metals i.e., Falcon Metals and Australian Strategic go up and down completely randomly.

Pair Corralation between Falcon Metals and Australian Strategic

Assuming the 90 days trading horizon Falcon Metals is expected to under-perform the Australian Strategic. But the stock apears to be less risky and, when comparing its historical volatility, Falcon Metals is 1.01 times less risky than Australian Strategic. The stock trades about -0.13 of its potential returns per unit of risk. The Australian Strategic Materials is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  51.00  in Australian Strategic Materials on September 25, 2024 and sell it today you would lose (2.00) from holding Australian Strategic Materials or give up 3.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Falcon Metals  vs.  Australian Strategic Materials

Falcon Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Australian Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Strategic Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Australian Strategic is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Falcon Metals and Australian Strategic

The main advantage of trading using opposite Falcon Metals and Australian Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Metals position performs unexpectedly, Australian Strategic 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 Australian Strategic will offset losses from the drop in Australian Strategic's long position.

The idea behind Falcon Metals and Australian Strategic Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.