Correlation Between Western Copper and Forsys Metals

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

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

Diversification Opportunities for Western Copper and Forsys Metals

0.41

Correlation Coefficient

Western Copper  Forsys Metals

Very weak diversification

The 3 months correlation between Western and Forsys is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and 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 Western Copper 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 Western Copper and 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 Western Copper i.e., Western Copper and Forsys Metals go up and down completely randomly.

Pair Corralation between Western Copper and Forsys Metals

Considering the 90-day investment horizon Western Copper is expected to generate 18.89 times less return on investment than Forsys Metals. But when comparing it to its historical volatility, Western Copper and is 1.89 times less risky than Forsys Metals. It trades about 0.01 of its potential returns per unit of risk. Forsys Metals Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Forsys Metals Corp on October 27, 2024 and sell it today you would earn a total of  5.00  from holding Forsys Metals Corp or generate 12.5% return on investment over 90 days.

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

Western Copper and  vs.  Forsys Metals Corp

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

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. Despite nearly stable basic indicators, Forsys Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Western Copper and Forsys Metals

The main advantage of trading using opposite Western Copper and Forsys Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Copper 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 Western Copper and 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 Commodity Directory module to find actively traded commodities issued by global exchanges.