Correlation Between Franco Nevada and Agnico Eagle

Can any of the company-specific risk be diversified away by investing in both Franco Nevada and Agnico Eagle 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 Franco Nevada and Agnico Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Franco Nevada and Agnico Eagle Mines, you can compare the effects of market volatilities on Franco Nevada and Agnico Eagle 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 Franco Nevada with a short position of Agnico Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franco Nevada and Agnico Eagle.

Diversification Opportunities for Franco Nevada and Agnico Eagle

0.73

Correlation Coefficient

Franco Nevada  Agnico Eagle

Poor diversification

The 3 months correlation between Franco and Agnico is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and Agnico Eagle Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agnico Eagle Mines and Franco Nevada 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 Franco Nevada are associated (or correlated) with Agnico Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agnico Eagle Mines has no effect on the direction of Franco Nevada i.e., Franco Nevada and Agnico Eagle go up and down completely randomly.

Pair Corralation between Franco Nevada and Agnico Eagle

Assuming the 90 days horizon Franco Nevada is expected to generate 50.71 times less return on investment than Agnico Eagle. But when comparing it to its historical volatility, Franco Nevada is 1.23 times less risky than Agnico Eagle. It trades about 0.0 of its potential returns per unit of risk. Agnico Eagle Mines is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,484  in Agnico Eagle Mines on September 22, 2024 and sell it today you would earn a total of  80.00  from holding Agnico Eagle Mines or generate 1.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Franco Nevada  vs.  Agnico Eagle Mines

Franco Nevada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franco Nevada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Franco Nevada is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Agnico Eagle Mines

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Agnico Eagle is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Franco Nevada and Agnico Eagle

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

The idea behind Franco Nevada and Agnico Eagle Mines 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .