Correlation Between Falcon Metals and K2 Asset

Can any of the company-specific risk be diversified away by investing in both Falcon Metals and K2 Asset 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 K2 Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Falcon Metals and K2 Asset Management, you can compare the effects of market volatilities on Falcon Metals and K2 Asset 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 K2 Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Metals and K2 Asset.

Diversification Opportunities for Falcon Metals and K2 Asset

-0.64

Correlation Coefficient

Falcon Metals  K2 Asset

Excellent diversification

The 3 months correlation between Falcon and KAM is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals and K2 Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K2 Asset Management 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 K2 Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K2 Asset Management has no effect on the direction of Falcon Metals i.e., Falcon Metals and K2 Asset go up and down completely randomly.

Pair Corralation between Falcon Metals and K2 Asset

Assuming the 90 days trading horizon Falcon Metals is expected to under-perform the K2 Asset. In addition to that, Falcon Metals is 1.25 times more volatile than K2 Asset Management. It trades about -0.15 of its total potential returns per unit of risk. K2 Asset Management is currently generating about 0.19 per unit of volatility. If you would invest  5.00  in K2 Asset Management on September 18, 2024 and sell it today you would earn a total of  2.50  from holding K2 Asset Management or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Falcon Metals  vs.  K2 Asset Management

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.

K2 Asset Management

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K2 Asset Management are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, K2 Asset unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Falcon Metals and K2 Asset

The main advantage of trading using opposite Falcon Metals and K2 Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Metals position performs unexpectedly, K2 Asset 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 K2 Asset will offset losses from the drop in K2 Asset's long position.

The idea behind Falcon Metals and K2 Asset Management 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 Global Correlations module to find global opportunities by holding instruments from different markets.