Correlation Between Westgold Resources and Franco Nevada
Can any of the company-specific risk be diversified away by investing in both Westgold Resources 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 Westgold Resources and Franco Nevada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westgold Resources and Franco Nevada, you can compare the effects of market volatilities on Westgold Resources 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 Westgold Resources with a short position of Franco Nevada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westgold Resources and Franco Nevada.
Diversification Opportunities for Westgold Resources and Franco Nevada
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westgold and Franco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Westgold Resources and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and Westgold Resources 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 Westgold Resources 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 Westgold Resources i.e., Westgold Resources and Franco Nevada go up and down completely randomly.
Pair Corralation between Westgold Resources and Franco Nevada
Assuming the 90 days horizon Westgold Resources is expected to generate 2.02 times more return on investment than Franco Nevada. However, Westgold Resources is 2.02 times more volatile than Franco Nevada. It trades about 0.07 of its potential returns per unit of risk. Franco Nevada is currently generating about -0.01 per unit of risk. If you would invest 96.00 in Westgold Resources on September 12, 2024 and sell it today you would earn a total of 81.00 from holding Westgold Resources or generate 84.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.72% |
| Values | Daily Returns |
Westgold Resources vs. Franco Nevada
Performance |
| Timeline |
| Westgold Resources |
| Franco Nevada |
Westgold Resources and Franco Nevada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westgold Resources and Franco Nevada
The main advantage of trading using opposite Westgold Resources and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westgold Resources 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.| Westgold Resources vs. Franco Nevada | Westgold Resources vs. Superior Plus Corp | Westgold Resources vs. SIVERS SEMICONDUCTORS AB | Westgold Resources vs. Norsk Hydro ASA |
| Franco Nevada vs. Superior Plus Corp | Franco Nevada vs. SIVERS SEMICONDUCTORS AB | Franco Nevada vs. Norsk Hydro ASA | Franco Nevada vs. Reliance Steel Aluminum |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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