Correlation Between Falcon Metals and Catalyst Metals

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

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

Diversification Opportunities for Falcon Metals and Catalyst Metals

0.23

Correlation Coefficient

Falcon Metals  Catalyst Metals

Modest diversification

The 3 months correlation between Falcon and Catalyst is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals and Catalyst Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals 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 Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Falcon Metals i.e., Falcon Metals and Catalyst Metals go up and down completely randomly.

Pair Corralation between Falcon Metals and Catalyst Metals

Assuming the 90 days trading horizon Falcon Metals is expected to under-perform the Catalyst Metals. But the stock apears to be less risky and, when comparing its historical volatility, Falcon Metals is 1.1 times less risky than Catalyst Metals. The stock trades about -0.08 of its potential returns per unit of risk. The Catalyst Metals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  258.00  in Catalyst Metals on September 20, 2024 and sell it today you would earn a total of  21.00  from holding Catalyst Metals or generate 8.14% return on investment over 90 days.

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

Falcon Metals  vs.  Catalyst Metals

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.

Catalyst Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Catalyst Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Falcon Metals and Catalyst Metals

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

The idea behind Falcon Metals and Catalyst Metals 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .