Correlation Between Franco Nevada and Mesabi Trust

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

By analyzing existing cross correlation between Franco Nevada and Mesabi Trust, you can compare the effects of market volatilities on Franco Nevada and Mesabi Trust 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 Mesabi Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franco Nevada and Mesabi Trust.

Diversification Opportunities for Franco Nevada and Mesabi Trust

0.22

Correlation Coefficient

Franco Nevada  Mesabi Trust

Modest diversification

The 3 months correlation between Franco and Mesabi is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and Mesabi Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesabi Trust 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 Mesabi Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesabi Trust has no effect on the direction of Franco Nevada i.e., Franco Nevada and Mesabi Trust go up and down completely randomly.

Pair Corralation between Franco Nevada and Mesabi Trust

Considering the 90-day investment horizon Franco Nevada is expected to under-perform the Mesabi Trust. In addition to that, Franco Nevada is 1.02 times more volatile than Mesabi Trust. It trades about -0.22 of its total potential returns per unit of risk. Mesabi Trust is currently generating about 0.28 per unit of volatility. If you would invest  2,423  in Mesabi Trust on August 30, 2024 and sell it today you would earn a total of  330.00  from holding Mesabi Trust or generate 13.62% return on investment over 90 days.

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

Franco Nevada  vs.  Mesabi Trust

Franco Nevada

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franco Nevada are ranked lower than 1 (%) 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.

Mesabi Trust

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mesabi Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Mesabi Trust sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franco Nevada and Mesabi Trust

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

The idea behind Franco Nevada and Mesabi Trust 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.