Correlation Between Falcon Oil and Hollywood Bowl

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

By analyzing existing cross correlation between Falcon Oil Gas and Hollywood Bowl Group, you can compare the effects of market volatilities on Falcon Oil and Hollywood Bowl 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 Oil with a short position of Hollywood Bowl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Oil and Hollywood Bowl.

Diversification Opportunities for Falcon Oil and Hollywood Bowl

-0.07

Correlation Coefficient

Falcon Oil  Hollywood Bowl

Good diversification

The 3 months correlation between Falcon and Hollywood is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Oil Gas and Hollywood Bowl Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hollywood Bowl Group and Falcon Oil 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 Oil Gas are associated (or correlated) with Hollywood Bowl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hollywood Bowl Group has no effect on the direction of Falcon Oil i.e., Falcon Oil and Hollywood Bowl go up and down completely randomly.

Pair Corralation between Falcon Oil and Hollywood Bowl

Assuming the 90 days trading horizon Falcon Oil Gas is expected to under-perform the Hollywood Bowl. In addition to that, Falcon Oil is 1.53 times more volatile than Hollywood Bowl Group. It trades about -0.18 of its total potential returns per unit of risk. Hollywood Bowl Group is currently generating about 0.01 per unit of volatility. If you would invest  32,000  in Hollywood Bowl Group on September 4, 2024 and sell it today you would earn a total of  50.00  from holding Hollywood Bowl Group or generate 0.16% return on investment over 90 days.

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

Falcon Oil Gas  vs.  Hollywood Bowl Group

Falcon Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Oil Gas 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hollywood Bowl Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hollywood Bowl Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hollywood Bowl is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Falcon Oil and Hollywood Bowl

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

The idea behind Falcon Oil Gas and Hollywood Bowl Group 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.