Correlation Between Forsys Metals and USA Recycling

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

Diversification Opportunities for Forsys Metals and USA Recycling

0.26

Correlation Coefficient

Forsys Metals  USA Recycling

Modest diversification

The 3 months correlation between Forsys and USA is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Forsys Metals Corp and USA Recycling Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USA Recycling Industries 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 USA Recycling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USA Recycling Industries has no effect on the direction of Forsys Metals i.e., Forsys Metals and USA Recycling go up and down completely randomly.

Pair Corralation between Forsys Metals and USA Recycling

Assuming the 90 days horizon Forsys Metals Corp is expected to generate 0.42 times more return on investment than USA Recycling. However, Forsys Metals Corp is 2.38 times less risky than USA Recycling. It trades about 0.0 of its potential returns per unit of risk. USA Recycling Industries is currently generating about -0.13 per unit of risk. If you would invest  47.00  in Forsys Metals Corp on October 15, 2024 and sell it today you would lose (3.00) from holding Forsys Metals Corp or give up 6.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Forsys Metals Corp  vs.  USA Recycling Industries

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.

USA Recycling Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days USA Recycling Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Forsys Metals and USA Recycling

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

The idea behind Forsys Metals Corp and USA Recycling Industries 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.