Correlation Between Franco Nevada and Pasofino Gold

Can any of the company-specific risk be diversified away by investing in both Franco Nevada and Pasofino Gold 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 Pasofino Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Franco Nevada and Pasofino Gold Limited, you can compare the effects of market volatilities on Franco Nevada and Pasofino Gold 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 Pasofino Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franco Nevada and Pasofino Gold.

Diversification Opportunities for Franco Nevada and Pasofino Gold

0.75

Correlation Coefficient

Franco Nevada  Pasofino Gold

Poor diversification

The 3 months correlation between Franco and Pasofino is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and Pasofino Gold Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pasofino Gold Limited 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 Pasofino Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pasofino Gold Limited has no effect on the direction of Franco Nevada i.e., Franco Nevada and Pasofino Gold go up and down completely randomly.

Pair Corralation between Franco Nevada and Pasofino Gold

Assuming the 90 days trading horizon Franco Nevada is expected to generate 4.33 times less return on investment than Pasofino Gold. But when comparing it to its historical volatility, Franco Nevada is 4.28 times less risky than Pasofino Gold. It trades about 0.13 of its potential returns per unit of risk. Pasofino Gold Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Pasofino Gold Limited on January 26, 2024 and sell it today you would earn a total of  22.00  from holding Pasofino Gold Limited or generate 48.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Franco Nevada  vs.  Pasofino Gold Limited

Franco Nevada

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franco Nevada are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Franco Nevada displayed solid returns over the last few months and may actually be approaching a breakup point.

Pasofino Gold Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pasofino Gold Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, Pasofino Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franco Nevada and Pasofino Gold

The main advantage of trading using opposite Franco Nevada and Pasofino Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franco Nevada position performs unexpectedly, Pasofino Gold 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 Pasofino Gold will offset losses from the drop in Pasofino Gold's long position.

The idea behind Franco Nevada and Pasofino Gold Limited 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.