Correlation Between Agnico Eagle and Franco Nevada

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

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

Diversification Opportunities for Agnico Eagle and Franco Nevada

0.92

Correlation Coefficient

Agnico Eagle  Franco Nevada

Almost no diversification

The 3 months correlation between Agnico and Franco is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Agnico Eagle Mines and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and Agnico Eagle 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 Agnico Eagle Mines are associated (or correlated) with Franco Nevada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franco Nevada has no effect on the direction of Agnico Eagle i.e., Agnico Eagle and Franco Nevada go up and down completely randomly.

Pair Corralation between Agnico Eagle and Franco Nevada

Considering the 90-day investment horizon Agnico Eagle Mines is expected to generate 1.15 times more return on investment than Franco Nevada. However, Agnico Eagle is 1.15 times more volatile than Franco Nevada. It trades about 0.06 of its potential returns per unit of risk. Franco Nevada is currently generating about 0.04 per unit of risk. If you would invest  7,901  in Agnico Eagle Mines on August 31, 2024 and sell it today you would earn a total of  454.00  from holding Agnico Eagle Mines or generate 5.75% return on investment over 90 days.

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

Agnico Eagle Mines  vs.  Franco Nevada

Agnico Eagle Mines

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Agnico Eagle may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Franco Nevada

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franco Nevada are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Franco Nevada is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Agnico Eagle and Franco Nevada

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

The idea behind Agnico Eagle Mines and Franco Nevada 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.