Correlation Between Franco Nevada and First Majestic
Can any of the company-specific risk be diversified away by investing in both Franco Nevada and First Majestic 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 First Majestic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franco Nevada and First Majestic Silver, you can compare the effects of market volatilities on Franco Nevada and First Majestic 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 First Majestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franco Nevada and First Majestic.
Diversification Opportunities for Franco Nevada and First Majestic
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franco and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and First Majestic Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Majestic 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 First Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Majestic Silver has no effect on the direction of Franco Nevada i.e., Franco Nevada and First Majestic go up and down completely randomly.
Pair Corralation between Franco Nevada and First Majestic
Considering the 90-day investment horizon Franco Nevada is expected to generate 0.8 times more return on investment than First Majestic. However, Franco Nevada is 1.24 times less risky than First Majestic. It trades about -0.22 of its potential returns per unit of risk. First Majestic Silver is currently generating about -0.41 per unit of risk. If you would invest 13,715 in Franco Nevada on August 30, 2024 and sell it today you would lose (1,419) from holding Franco Nevada or give up 10.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Franco Nevada vs. First Majestic Silver
Performance |
| Timeline |
| Franco Nevada |
| First Majestic Silver |
Franco Nevada and First Majestic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franco Nevada and First Majestic
The main advantage of trading using opposite Franco Nevada and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franco Nevada position performs unexpectedly, First Majestic 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 First Majestic will offset losses from the drop in First Majestic's long position.| Franco Nevada vs. Royal Gold | Franco Nevada vs. Agnico Eagle Mines | Franco Nevada vs. Pan American Silver | Franco Nevada vs. Sandstorm Gold Ltd |
| First Majestic vs. Aya Gold Silver | First Majestic vs. Discovery Metals Corp | First Majestic vs. Reyna Silver Corp | First Majestic vs. Andean Precious Metals |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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