Correlation Between Zegona Communications and Falcon Oil

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

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

Diversification Opportunities for Zegona Communications and Falcon Oil

0.62

Correlation Coefficient

Zegona Communications  Falcon Oil

Poor diversification

The 3 months correlation between Zegona and Falcon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and Falcon Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Oil Gas and Zegona Communications 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 Zegona Communications Plc are associated (or correlated) with Falcon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Oil Gas has no effect on the direction of Zegona Communications i.e., Zegona Communications and Falcon Oil go up and down completely randomly.

Pair Corralation between Zegona Communications and Falcon Oil

Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 1.17 times more return on investment than Falcon Oil. However, Zegona Communications is 1.17 times more volatile than Falcon Oil Gas. It trades about -0.06 of its potential returns per unit of risk. Falcon Oil Gas is currently generating about -0.22 per unit of risk. If you would invest  32,800  in Zegona Communications Plc on September 23, 2024 and sell it today you would lose (1,200) from holding Zegona Communications Plc or give up 3.66% of portfolio value over 90 days.

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

Zegona Communications Plc  vs.  Falcon Oil Gas

Zegona Communications Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zegona Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 unsteady 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.

Pair Trading with Zegona Communications and Falcon Oil

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

The idea behind Zegona Communications Plc and Falcon Oil Gas 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..