Correlation Between Fortuna Silver and Franco Nevada
Can any of the company-specific risk be diversified away by investing in both Fortuna Silver 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 Fortuna Silver and Franco Nevada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortuna Silver Mines and Franco Nevada, you can compare the effects of market volatilities on Fortuna Silver 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 Fortuna Silver with a short position of Franco Nevada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortuna Silver and Franco Nevada.
Diversification Opportunities for Fortuna Silver and Franco Nevada
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fortuna and Franco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Fortuna Silver Mines and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and Fortuna Silver 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 Fortuna Silver Mines 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 Fortuna Silver i.e., Fortuna Silver and Franco Nevada go up and down completely randomly.
Pair Corralation between Fortuna Silver and Franco Nevada
Considering the 90-day investment horizon Fortuna Silver Mines is expected to generate 1.19 times more return on investment than Franco Nevada. However, Fortuna Silver is 1.19 times more volatile than Franco Nevada. It trades about -0.1 of its potential returns per unit of risk. Franco Nevada is currently generating about -0.26 per unit of risk. If you would invest 512.00 in Fortuna Silver Mines on August 28, 2024 and sell it today you would lose (30.00) from holding Fortuna Silver Mines or give up 5.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortuna Silver Mines vs. Franco Nevada
Performance |
| Timeline |
| Fortuna Silver Mines |
| Franco Nevada |
Fortuna Silver and Franco Nevada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortuna Silver and Franco Nevada
The main advantage of trading using opposite Fortuna Silver and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortuna Silver 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 Fortuna Silver Mines 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.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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