Correlation Between Forsys Metals and American Lithium

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

Diversification Opportunities for Forsys Metals and American Lithium

0.74

Correlation Coefficient

Forsys Metals  American Lithium

Poor diversification

The 3 months correlation between Forsys and American is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Forsys Metals Corp and American Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Lithium Corp 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 American Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Lithium Corp has no effect on the direction of Forsys Metals i.e., Forsys Metals and American Lithium go up and down completely randomly.

Pair Corralation between Forsys Metals and American Lithium

Assuming the 90 days trading horizon Forsys Metals Corp is expected to generate 0.91 times more return on investment than American Lithium. However, Forsys Metals Corp is 1.1 times less risky than American Lithium. It trades about -0.11 of its potential returns per unit of risk. American Lithium Corp is currently generating about -0.15 per unit of risk. If you would invest  69.00  in Forsys Metals Corp on December 5, 2024 and sell it today you would lose (25.00) from holding Forsys Metals Corp or give up 36.23% 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.  American Lithium Corp

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. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

American Lithium Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Lithium Corp 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 April 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 American Lithium

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

The idea behind Forsys Metals Corp and American Lithium 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.