Correlation Between Franco Nevada and Pan American
Can any of the company-specific risk be diversified away by investing in both Franco Nevada and Pan American 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 Pan American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franco Nevada and Pan American Silver, you can compare the effects of market volatilities on Franco Nevada and Pan American 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 Pan American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franco Nevada and Pan American.
Diversification Opportunities for Franco Nevada and Pan American
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franco and Pan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver 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 Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of Franco Nevada i.e., Franco Nevada and Pan American go up and down completely randomly.
Pair Corralation between Franco Nevada and Pan American
Assuming the 90 days trading horizon Franco Nevada is expected to under-perform the Pan American. But the stock apears to be less risky and, when comparing its historical volatility, Franco Nevada is 1.63 times less risky than Pan American. The stock trades about 0.0 of its potential returns per unit of risk. The Pan American Silver is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,165 in Pan American Silver on August 30, 2024 and sell it today you would earn a total of 879.00 from holding Pan American Silver or generate 40.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franco Nevada vs. Pan American Silver
Performance |
| Timeline |
| Franco Nevada |
| Pan American Silver |
Franco Nevada and Pan American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franco Nevada and Pan American
The main advantage of trading using opposite Franco Nevada and Pan American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franco Nevada position performs unexpectedly, Pan American 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 Pan American will offset losses from the drop in Pan American's long position.| Franco Nevada vs. First Majestic Silver | Franco Nevada vs. Ivanhoe Energy | Franco Nevada vs. Orezone Gold Corp | Franco Nevada vs. Faraday Copper Corp |
| Pan American vs. Solid Impact Investments | Pan American vs. Upstart Investments | Pan American vs. Brookfield Office Properties | Pan American vs. 2028 Investment Grade |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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