Correlation Between Consol Energy and Forsys Metals

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

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

Diversification Opportunities for Consol Energy and Forsys Metals

0.18

Correlation Coefficient

Consol Energy  Forsys Metals

Average diversification

The 3 months correlation between Consol and Forsys is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and Forsys Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forsys Metals Corp and Consol 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 Consol Energy are associated (or correlated) with Forsys Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forsys Metals Corp has no effect on the direction of Consol Energy i.e., Consol Energy and Forsys Metals go up and down completely randomly.

Pair Corralation between Consol Energy and Forsys Metals

Given the investment horizon of 90 days Consol Energy is expected to under-perform the Forsys Metals. But the stock apears to be less risky and, when comparing its historical volatility, Consol Energy is 2.74 times less risky than Forsys Metals. The stock trades about -0.15 of its potential returns per unit of risk. The Forsys Metals Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Forsys Metals Corp on October 25, 2024 and sell it today you would earn a total of  0.00  from holding Forsys Metals Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	73.68%
Values	Daily Returns

Consol Energy  vs.  Forsys Metals Corp

Consol Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consol Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Forsys Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forsys Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Forsys Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Consol Energy and Forsys Metals

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

The idea behind Consol Energy and Forsys Metals Corp 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.