Correlation Between Franco Nevada and IAMGold
Can any of the company-specific risk be diversified away by investing in both Franco Nevada and IAMGold 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 IAMGold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franco Nevada and IAMGold, you can compare the effects of market volatilities on Franco Nevada and IAMGold 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 IAMGold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franco Nevada and IAMGold.
Diversification Opportunities for Franco Nevada and IAMGold
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franco and IAMGold is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and IAMGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAMGold 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 IAMGold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAMGold has no effect on the direction of Franco Nevada i.e., Franco Nevada and IAMGold go up and down completely randomly.
Pair Corralation between Franco Nevada and IAMGold
Considering the 90-day investment horizon Franco Nevada is expected to under-perform the IAMGold. But the stock apears to be less risky and, when comparing its historical volatility, Franco Nevada is 1.79 times less risky than IAMGold. The stock trades about -0.25 of its potential returns per unit of risk. The IAMGold is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 565.00 in IAMGold on August 28, 2024 and sell it today you would lose (32.00) from holding IAMGold or give up 5.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franco Nevada vs. IAMGold
Performance |
| Timeline |
| Franco Nevada |
| IAMGold |
Franco Nevada and IAMGold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franco Nevada and IAMGold
The main advantage of trading using opposite Franco Nevada and IAMGold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franco Nevada position performs unexpectedly, IAMGold 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 IAMGold will offset losses from the drop in IAMGold's long position.The idea behind Franco Nevada and IAMGold 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.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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