Correlation Between PT Indo and Franco Nevada
Can any of the company-specific risk be diversified away by investing in both PT Indo 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 PT Indo and Franco Nevada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PT Indo Tambangraya and Franco Nevada, you can compare the effects of market volatilities on PT Indo 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 PT Indo with a short position of Franco Nevada. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indo and Franco Nevada.
Diversification Opportunities for PT Indo and Franco Nevada
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 3IB and Franco is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding PT Indo Tambangraya and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and PT Indo 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 PT Indo Tambangraya 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 PT Indo i.e., PT Indo and Franco Nevada go up and down completely randomly.
Pair Corralation between PT Indo and Franco Nevada
Assuming the 90 days trading horizon PT Indo Tambangraya is expected to under-perform the Franco Nevada. But the stock apears to be less risky and, when comparing its historical volatility, PT Indo Tambangraya is 1.39 times less risky than Franco Nevada. The stock trades about -0.12 of its potential returns per unit of risk. The Franco Nevada is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 12,140 in Franco Nevada on November 18, 2024 and sell it today you would earn a total of 1,155 from holding Franco Nevada or generate 9.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Indo Tambangraya vs. Franco Nevada
Performance |
| Timeline |
| PT Indo Tambangraya |
| Franco Nevada |
PT Indo and Franco Nevada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Indo and Franco Nevada
The main advantage of trading using opposite PT Indo and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Indo 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 PT Indo Tambangraya 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.| Franco Nevada vs. ZIJIN MINH UNSPADR20 | Franco Nevada vs. Newmont | Franco Nevada vs. Barrick Gold | Franco Nevada vs. Agnico Eagle Mines |
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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