Correlation Between Falcon Metals and EP Financial

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

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

Diversification Opportunities for Falcon Metals and EP Financial

-0.43

Correlation Coefficient

Falcon Metals  EP Financial

Very good diversification

The 3 months correlation between Falcon and EP1 is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals and EP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EP Financial Group 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 EP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EP Financial Group has no effect on the direction of Falcon Metals i.e., Falcon Metals and EP Financial go up and down completely randomly.

Pair Corralation between Falcon Metals and EP Financial

Assuming the 90 days trading horizon Falcon Metals is expected to under-perform the EP Financial. In addition to that, Falcon Metals is 1.8 times more volatile than EP Financial Group. It trades about -0.12 of its total potential returns per unit of risk. EP Financial Group is currently generating about 0.01 per unit of volatility. If you would invest  52.00  in EP Financial Group on September 23, 2024 and sell it today you would earn a total of  0.00  from holding EP Financial Group or generate 0.0% return on investment over 90 days.

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

Falcon Metals  vs.  EP Financial Group

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.

EP Financial Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EP Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EP Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Falcon Metals and EP Financial

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

The idea behind Falcon Metals and EP Financial Group 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.