Correlation Between Contango ORE and Forsys Metals

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

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

Diversification Opportunities for Contango ORE and Forsys Metals

0.34

Correlation Coefficient

Contango ORE  Forsys Metals

Weak diversification

The 3 months correlation between Contango and Forsys is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Contango ORE 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 Contango ORE 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 Contango ORE 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 Contango ORE i.e., Contango ORE and Forsys Metals go up and down completely randomly.

Pair Corralation between Contango ORE and Forsys Metals

Given the investment horizon of 90 days Contango ORE is expected to under-perform the Forsys Metals. But the stock apears to be less risky and, when comparing its historical volatility, Contango ORE is 1.04 times less risky than Forsys Metals. The stock trades about -0.25 of its potential returns per unit of risk. The Forsys Metals Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Forsys Metals Corp on October 26, 2024 and sell it today you would lose (6.00) from holding Forsys Metals Corp or give up 12.5% of portfolio value over 90 days.

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

Contango ORE  vs.  Forsys Metals Corp

Contango ORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Contango ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Contango ORE and Forsys Metals

The main advantage of trading using opposite Contango ORE and Forsys Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Contango ORE 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 Contango ORE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.