Correlation Between Falcon Energy and Brookfield Asset

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

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

Diversification Opportunities for Falcon Energy and Brookfield Asset

0.24

Correlation Coefficient

Falcon Energy  Brookfield Asset

Modest diversification

The 3 months correlation between Falcon and Brookfield is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Energy Materials and Brookfield Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Asset Man and Falcon Energy 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 Energy Materials are associated (or correlated) with Brookfield Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Asset Man has no effect on the direction of Falcon Energy i.e., Falcon Energy and Brookfield Asset go up and down completely randomly.

Pair Corralation between Falcon Energy and Brookfield Asset

Assuming the 90 days trading horizon Falcon Energy Materials is expected to generate 5.81 times more return on investment than Brookfield Asset. However, Falcon Energy is 5.81 times more volatile than Brookfield Asset Management. It trades about 0.04 of its potential returns per unit of risk. Brookfield Asset Management is currently generating about 0.18 per unit of risk. If you would invest  67.00  in Falcon Energy Materials on September 19, 2024 and sell it today you would earn a total of  4.00  from holding Falcon Energy Materials or generate 5.97% return on investment over 90 days.

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

Falcon Energy Materials  vs.  Brookfield Asset Management

Falcon Energy Materials

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Energy Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Falcon Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brookfield Asset Man

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Asset Management are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Brookfield Asset may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Falcon Energy and Brookfield Asset

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

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