Correlation Between Forsys Metals and Sego Resources

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

Diversification Opportunities for Forsys Metals and Sego Resources

0.23

Correlation Coefficient

Forsys Metals  Sego Resources

Modest diversification

The 3 months correlation between Forsys and Sego is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Forsys Metals Corp and Sego Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sego Resources 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 Sego Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sego Resources has no effect on the direction of Forsys Metals i.e., Forsys Metals and Sego Resources go up and down completely randomly.

Pair Corralation between Forsys Metals and Sego Resources

Assuming the 90 days trading horizon Forsys Metals Corp is expected to under-perform the Sego Resources. But the stock apears to be less risky and, when comparing its historical volatility, Forsys Metals Corp is 2.29 times less risky than Sego Resources. The stock trades about -0.02 of its potential returns per unit of risk. The Sego Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Sego Resources on December 20, 2024 and sell it today you would earn a total of  0.50  from holding Sego Resources or generate 25.0% return on investment over 90 days.

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

Forsys Metals Corp  vs.  Sego Resources

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Sego Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sego Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Sego Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Forsys Metals and Sego Resources

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

The idea behind Forsys Metals Corp and Sego Resources 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.