Correlation Between Franco Nevada and Caledonia Mining
Can any of the company-specific risk be diversified away by investing in both Franco Nevada and Caledonia Mining 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 Caledonia Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franco Nevada and Caledonia Mining, you can compare the effects of market volatilities on Franco Nevada and Caledonia Mining 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 Caledonia Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franco Nevada and Caledonia Mining.
Diversification Opportunities for Franco Nevada and Caledonia Mining
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franco and Caledonia is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining 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 Caledonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Mining has no effect on the direction of Franco Nevada i.e., Franco Nevada and Caledonia Mining go up and down completely randomly.
Pair Corralation between Franco Nevada and Caledonia Mining
Considering the 90-day investment horizon Franco Nevada is expected to generate 0.55 times more return on investment than Caledonia Mining. However, Franco Nevada is 1.81 times less risky than Caledonia Mining. It trades about -0.17 of its potential returns per unit of risk. Caledonia Mining is currently generating about -0.42 per unit of risk. If you would invest 13,266 in Franco Nevada on September 1, 2024 and sell it today you would lose (1,004) from holding Franco Nevada or give up 7.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franco Nevada vs. Caledonia Mining
Performance |
| Timeline |
| Franco Nevada |
| Caledonia Mining |
Franco Nevada and Caledonia Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franco Nevada and Caledonia Mining
The main advantage of trading using opposite Franco Nevada and Caledonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franco Nevada position performs unexpectedly, Caledonia Mining 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 Caledonia Mining will offset losses from the drop in Caledonia Mining'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 |
| Caledonia Mining vs. DRDGOLD Limited ADR | Caledonia Mining vs. Galiano Gold | Caledonia Mining vs. Mastech Holdings | Caledonia Mining vs. EMX Royalty Corp |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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