Correlation Between Major Drilling and Forsys Metals

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

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

Diversification Opportunities for Major Drilling and Forsys Metals

0.0

Correlation Coefficient

Major Drilling  Forsys Metals

Pay attention - limited upside

The 3 months correlation between Major and Forsys is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group 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 Major Drilling 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 Major Drilling Group 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 Major Drilling i.e., Major Drilling and Forsys Metals go up and down completely randomly.

Pair Corralation between Major Drilling and Forsys Metals

Assuming the 90 days trading horizon Major Drilling Group is expected to under-perform the Forsys Metals. But the stock apears to be less risky and, when comparing its historical volatility, Major Drilling Group is 2.5 times less risky than Forsys Metals. The stock trades about -0.04 of its potential returns per unit of risk. The Forsys Metals Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  64.00  in Forsys Metals Corp on December 23, 2024 and sell it today you would lose (3.00) from holding Forsys Metals Corp or give up 4.69% of portfolio value over 90 days.

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

Major Drilling Group  vs.  Forsys Metals Corp

Major Drilling Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Major Drilling Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Forsys Metals Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Forsys Metals Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Major Drilling and Forsys Metals

The main advantage of trading using opposite Major Drilling and Forsys Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling 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 Major Drilling Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.