Correlation Between Filo Mining and Falcon Energy

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

By analyzing existing cross correlation between Filo Mining Corp and Falcon Energy Materials, you can compare the effects of market volatilities on Filo Mining and Falcon Energy 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 Filo Mining with a short position of Falcon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Filo Mining and Falcon Energy.

Diversification Opportunities for Filo Mining and Falcon Energy

0.39

Correlation Coefficient

Filo Mining  Falcon Energy

Weak diversification

The 3 months correlation between Filo and Falcon is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Filo Mining Corp and Falcon Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Energy Materials and Filo Mining 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 Filo Mining Corp are associated (or correlated) with Falcon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Energy Materials has no effect on the direction of Filo Mining i.e., Filo Mining and Falcon Energy go up and down completely randomly.

Pair Corralation between Filo Mining and Falcon Energy

Assuming the 90 days trading horizon Filo Mining is expected to generate 4.09 times less return on investment than Falcon Energy. But when comparing it to its historical volatility, Filo Mining Corp is 6.03 times less risky than Falcon Energy. It trades about 0.12 of its potential returns per unit of risk. Falcon Energy Materials is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Falcon Energy Materials on September 5, 2024 and sell it today you would earn a total of  12.00  from holding Falcon Energy Materials or generate 17.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Filo Mining Corp  vs.  Falcon Energy Materials

Filo Mining Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Filo Mining Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Filo Mining is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Falcon Energy Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Energy Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Falcon Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Filo Mining and Falcon Energy

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

The idea behind Filo Mining Corp and Falcon Energy 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.