Correlation Between Destination and Forsys Metals

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

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

Diversification Opportunities for Destination and Forsys Metals

0.13

Correlation Coefficient

Destination  Forsys Metals

Average diversification

The 3 months correlation between Destination and Forsys is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Destination XL Group 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 Destination 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 Destination XL Group 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 Destination i.e., Destination and Forsys Metals go up and down completely randomly.

Pair Corralation between Destination and Forsys Metals

Given the investment horizon of 90 days Destination XL Group is expected to under-perform the Forsys Metals. But the stock apears to be less risky and, when comparing its historical volatility, Destination XL Group is 1.02 times less risky than Forsys Metals. The stock trades about -0.02 of its potential returns per unit of risk. The Forsys Metals Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Forsys Metals Corp on October 7, 2024 and sell it today you would earn a total of  8.00  from holding Forsys Metals Corp or generate 18.6% return on investment over 90 days.

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

Destination XL Group  vs.  Forsys Metals Corp

Destination XL Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 Destination and Forsys Metals

The main advantage of trading using opposite Destination and Forsys Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Destination 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 Destination XL Group 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.