Correlation Between Northern Star and Franco Nevada
Can any of the company-specific risk be diversified away by investing in both Northern Star 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 Northern Star and Franco Nevada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Star Resources and Franco Nevada, you can compare the effects of market volatilities on Northern Star 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 Northern Star with a short position of Franco Nevada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and Franco Nevada.
Diversification Opportunities for Northern Star and Franco Nevada
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Franco is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and Northern Star 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 Northern Star Resources 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 Northern Star i.e., Northern Star and Franco Nevada go up and down completely randomly.
Pair Corralation between Northern Star and Franco Nevada
Assuming the 90 days horizon Northern Star Resources is expected to generate 1.79 times more return on investment than Franco Nevada. However, Northern Star is 1.79 times more volatile than Franco Nevada. It trades about 0.02 of its potential returns per unit of risk. Franco Nevada is currently generating about -0.11 per unit of risk. If you would invest 1,095 in Northern Star Resources on August 26, 2024 and sell it today you would lose (1.00) from holding Northern Star Resources or give up 0.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Star Resources vs. Franco Nevada
Performance |
| Timeline |
| Northern Star Resources |
| Franco Nevada |
Northern Star and Franco Nevada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and Franco Nevada
The main advantage of trading using opposite Northern Star and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star 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.| Northern Star vs. Franco Nevada | Northern Star vs. Agnico Eagle Mines | Northern Star vs. Superior Plus Corp | Northern Star vs. NMI Holdings |
| Franco Nevada vs. Agnico Eagle Mines | Franco Nevada vs. Superior Plus Corp | Franco Nevada vs. NMI Holdings | Franco Nevada vs. Origin Agritech |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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