Correlation Between Forsys Metals and Lycos Energy

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

Diversification Opportunities for Forsys Metals and Lycos Energy

0.48

Correlation Coefficient

Forsys Metals  Lycos Energy

Very weak diversification

The 3 months correlation between Forsys and Lycos is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Forsys Metals Corp and Lycos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lycos Energy 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 Lycos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lycos Energy has no effect on the direction of Forsys Metals i.e., Forsys Metals and Lycos Energy go up and down completely randomly.

Pair Corralation between Forsys Metals and Lycos Energy

Assuming the 90 days trading horizon Forsys Metals Corp is expected to generate 1.63 times more return on investment than Lycos Energy. However, Forsys Metals is 1.63 times more volatile than Lycos Energy. It trades about 0.0 of its potential returns per unit of risk. Lycos Energy is currently generating about -0.07 per unit of risk. If you would invest  64.00  in Forsys Metals Corp on September 22, 2024 and sell it today you would lose (4.00) from holding Forsys Metals Corp or give up 6.25% of portfolio value over 90 days.

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

Forsys Metals Corp  vs.  Lycos Energy

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. In spite of very healthy basic indicators, Forsys Metals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Lycos Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lycos Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Forsys Metals and Lycos Energy

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

The idea behind Forsys Metals Corp and Lycos Energy 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.