Correlation Between Falcon Energy and Westshore Terminals

Can any of the company-specific risk be diversified away by investing in both Falcon Energy and Westshore Terminals 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 Westshore Terminals 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 Westshore Terminals Investment, you can compare the effects of market volatilities on Falcon Energy and Westshore Terminals 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 Westshore Terminals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Energy and Westshore Terminals.

Diversification Opportunities for Falcon Energy and Westshore Terminals

0.21

Correlation Coefficient

Falcon Energy  Westshore Terminals

Modest diversification

The 3 months correlation between Falcon and Westshore is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Energy Materials and Westshore Terminals Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westshore Terminals 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 Westshore Terminals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westshore Terminals has no effect on the direction of Falcon Energy i.e., Falcon Energy and Westshore Terminals go up and down completely randomly.

Pair Corralation between Falcon Energy and Westshore Terminals

Assuming the 90 days trading horizon Falcon Energy Materials is expected to generate 3.67 times more return on investment than Westshore Terminals. However, Falcon Energy is 3.67 times more volatile than Westshore Terminals Investment. It trades about 0.08 of its potential returns per unit of risk. Westshore Terminals Investment is currently generating about 0.03 per unit of risk. 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	100.0%
Values	Daily Returns

Falcon Energy Materials  vs.  Westshore Terminals Investment

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.

Westshore Terminals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Westshore Terminals Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Westshore Terminals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Falcon Energy and Westshore Terminals

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

The idea behind Falcon Energy Materials and Westshore Terminals Investment 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.