Correlation Between Gatos Silver and Forsys Metals

Can any of the company-specific risk be diversified away by investing in both Gatos Silver and Forsys Metals 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 Gatos Silver and Forsys Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gatos Silver and Forsys Metals Corp, you can compare the effects of market volatilities on Gatos Silver and Forsys Metals 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 Gatos Silver with a short position of Forsys Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gatos Silver and Forsys Metals.

Diversification Opportunities for Gatos Silver and Forsys Metals

0.05

Correlation Coefficient

Gatos Silver  Forsys Metals

Significant diversification

The 3 months correlation between Gatos and Forsys is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and Forsys Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forsys Metals Corp and Gatos Silver 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 Gatos Silver are associated (or correlated) with Forsys Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forsys Metals Corp has no effect on the direction of Gatos Silver i.e., Gatos Silver and Forsys Metals go up and down completely randomly.

Pair Corralation between Gatos Silver and Forsys Metals

Assuming the 90 days trading horizon Gatos Silver is expected to generate 0.95 times more return on investment than Forsys Metals. However, Gatos Silver is 1.06 times less risky than Forsys Metals. It trades about -0.12 of its potential returns per unit of risk. Forsys Metals Corp is currently generating about -0.19 per unit of risk. If you would invest  2,215  in Gatos Silver on September 23, 2024 and sell it today you would lose (225.00) from holding Gatos Silver or give up 10.16% of portfolio value over 90 days.

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

Gatos Silver  vs.  Forsys Metals Corp

Gatos Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gatos Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Gatos Silver is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Gatos Silver and Forsys Metals

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

The idea behind Gatos Silver and Forsys Metals 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.