Correlation Between Western Digital and Forsys Metals

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

Diversification Opportunities for Western Digital and Forsys Metals

0.34

Correlation Coefficient

Western Digital  Forsys Metals

Weak diversification

The 3 months correlation between Western and Forsys is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital 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 Digital 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 Digital 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 Digital i.e., Western Digital and Forsys Metals go up and down completely randomly.

Pair Corralation between Western Digital and Forsys Metals

Considering the 90-day investment horizon Western Digital is expected to generate 0.72 times more return on investment than Forsys Metals. However, Western Digital is 1.38 times less risky than Forsys Metals. It trades about -0.14 of its potential returns per unit of risk. Forsys Metals Corp is currently generating about -0.24 per unit of risk. If you would invest  6,588  in Western Digital on September 22, 2024 and sell it today you would lose (564.00) from holding Western Digital or give up 8.56% of portfolio value over 90 days.

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

Western Digital  vs.  Forsys Metals Corp

Western Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Western Digital and Forsys Metals

The main advantage of trading using opposite Western Digital and Forsys Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital 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 Digital 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..