Correlation Between Falcons Beyond and Vast Renewables

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

By analyzing existing cross correlation between Falcons Beyond Global, and Vast Renewables Limited, you can compare the effects of market volatilities on Falcons Beyond and Vast Renewables 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 Falcons Beyond with a short position of Vast Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcons Beyond and Vast Renewables.

Diversification Opportunities for Falcons Beyond and Vast Renewables

0.05

Correlation Coefficient

Falcons Beyond  Vast Renewables

Significant diversification

The 3 months correlation between Falcons and Vast is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Falcons Beyond Global, and Vast Renewables Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vast Renewables and Falcons Beyond 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 Falcons Beyond Global, are associated (or correlated) with Vast Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vast Renewables has no effect on the direction of Falcons Beyond i.e., Falcons Beyond and Vast Renewables go up and down completely randomly.

Pair Corralation between Falcons Beyond and Vast Renewables

Assuming the 90 days horizon Falcons Beyond is expected to generate 2.06 times less return on investment than Vast Renewables. But when comparing it to its historical volatility, Falcons Beyond Global, is 1.53 times less risky than Vast Renewables. It trades about 0.06 of its potential returns per unit of risk. Vast Renewables Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  113.00  in Vast Renewables Limited on September 25, 2024 and sell it today you would earn a total of  4.00  from holding Vast Renewables Limited or generate 3.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.94%
Values	Daily Returns

Falcons Beyond Global,  vs.  Vast Renewables Limited

Falcons Beyond Global,

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Falcons Beyond Global, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Falcons Beyond showed solid returns over the last few months and may actually be approaching a breakup point.

Vast Renewables

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vast Renewables Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Vast Renewables exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Falcons Beyond and Vast Renewables

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

The idea behind Falcons Beyond Global, and Vast Renewables Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.