Correlation Between Forsys Metals and LILLY

Can any of the company-specific risk be diversified away by investing in both Forsys Metals and LILLY 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 LILLY 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 LILLY ELI 275, you can compare the effects of market volatilities on Forsys Metals and LILLY 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 LILLY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forsys Metals and LILLY.

Diversification Opportunities for Forsys Metals and LILLY

0.4

Correlation Coefficient

Forsys Metals  LILLY

Very weak diversification

The 3 months correlation between Forsys and LILLY is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Forsys Metals Corp and LILLY ELI 275 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LILLY ELI 275 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 LILLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LILLY ELI 275 has no effect on the direction of Forsys Metals i.e., Forsys Metals and LILLY go up and down completely randomly.

Pair Corralation between Forsys Metals and LILLY

Assuming the 90 days horizon Forsys Metals Corp is expected to generate 15.65 times more return on investment than LILLY. However, Forsys Metals is 15.65 times more volatile than LILLY ELI 275. It trades about 0.03 of its potential returns per unit of risk. LILLY ELI 275 is currently generating about 0.0 per unit of risk. If you would invest  35.00  in Forsys Metals Corp on September 24, 2024 and sell it today you would earn a total of  4.00  from holding Forsys Metals Corp or generate 11.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.12%
Values	Daily Returns

Forsys Metals Corp  vs.  LILLY ELI 275

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

LILLY ELI 275

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LILLY ELI 275 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LILLY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Forsys Metals and LILLY

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

The idea behind Forsys Metals Corp and LILLY ELI 275 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.