Correlation Between Seabridge Gold and Franco Nevada
Can any of the company-specific risk be diversified away by investing in both Seabridge Gold 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 Seabridge Gold and Franco Nevada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seabridge Gold and Franco Nevada, you can compare the effects of market volatilities on Seabridge Gold 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 Seabridge Gold with a short position of Franco Nevada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seabridge Gold and Franco Nevada.
Diversification Opportunities for Seabridge Gold and Franco Nevada
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Seabridge and Franco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Seabridge Gold and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and Seabridge Gold 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 Seabridge Gold 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 Seabridge Gold i.e., Seabridge Gold and Franco Nevada go up and down completely randomly.
Pair Corralation between Seabridge Gold and Franco Nevada
Allowing for the 90-day total investment horizon Seabridge Gold is expected to under-perform the Franco Nevada. In addition to that, Seabridge Gold is 1.44 times more volatile than Franco Nevada. It trades about -0.37 of its total potential returns per unit of risk. Franco Nevada is currently generating about -0.26 per unit of volatility. If you would invest 13,598 in Franco Nevada on August 28, 2024 and sell it today you would lose (1,541) from holding Franco Nevada or give up 11.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seabridge Gold vs. Franco Nevada
Performance |
| Timeline |
| Seabridge Gold |
| Franco Nevada |
Seabridge Gold and Franco Nevada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seabridge Gold and Franco Nevada
The main advantage of trading using opposite Seabridge Gold and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seabridge Gold 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 Seabridge Gold 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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