Correlation Between Pan American and Franco Nevada
Can any of the company-specific risk be diversified away by investing in both Pan American 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 Pan American and Franco Nevada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pan American Silver and Franco Nevada, you can compare the effects of market volatilities on Pan American 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 Pan American with a short position of Franco Nevada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan American and Franco Nevada.
Diversification Opportunities for Pan American and Franco Nevada
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pan and Franco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and Pan American 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 Pan American Silver 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 Pan American i.e., Pan American and Franco Nevada go up and down completely randomly.
Pair Corralation between Pan American and Franco Nevada
Given the investment horizon of 90 days Pan American Silver is expected to generate 1.27 times more return on investment than Franco Nevada. However, Pan American is 1.27 times more volatile than Franco Nevada. It trades about -0.12 of its potential returns per unit of risk. Franco Nevada is currently generating about -0.21 per unit of risk. If you would invest 2,433 in Pan American Silver on August 27, 2024 and sell it today you would lose (175.00) from holding Pan American Silver or give up 7.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pan American Silver vs. Franco Nevada
Performance |
| Timeline |
| Pan American Silver |
| Franco Nevada |
Pan American and Franco Nevada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pan American and Franco Nevada
The main advantage of trading using opposite Pan American and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan American 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.| Pan American vs. Newmont Goldcorp Corp | Pan American vs. Wheaton Precious Metals | Pan American vs. Franco Nevada | Pan American vs. Kinross Gold |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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