Correlation Between Forsys Metals and Lockheed Martin

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

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

Diversification Opportunities for Forsys Metals and Lockheed Martin

0.77

Correlation Coefficient

Forsys Metals  Lockheed Martin

Poor diversification

The 3 months correlation between Forsys and Lockheed is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Forsys Metals Corp and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Forsys Metals 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 Forsys Metals Corp are associated (or correlated) with Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of Forsys Metals i.e., Forsys Metals and Lockheed Martin go up and down completely randomly.

Pair Corralation between Forsys Metals and Lockheed Martin

Assuming the 90 days horizon Forsys Metals Corp is expected to generate 4.11 times more return on investment than Lockheed Martin. However, Forsys Metals is 4.11 times more volatile than Lockheed Martin. It trades about -0.01 of its potential returns per unit of risk. Lockheed Martin is currently generating about -0.05 per unit of risk. If you would invest  37.00  in Forsys Metals Corp on December 22, 2024 and sell it today you would lose (7.00) from holding Forsys Metals Corp or give up 18.92% of portfolio value over 90 days.

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

Forsys Metals Corp  vs.  Lockheed Martin

Forsys Metals Corp

Risk-Adjusted Performance

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.

Lockheed Martin

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Forsys Metals and Lockheed Martin

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

The idea behind Forsys Metals Corp and Lockheed Martin 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.