Correlation Between Franco Nevada and MAGNUM DCORP

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

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

Diversification Opportunities for Franco Nevada and MAGNUM DCORP

-0.07

Correlation Coefficient

Franco Nevada  MAGNUM DCORP

Good diversification

The 3 months correlation between Franco and MAGNUM is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and MAGNUM DCORP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAGNUM DCORP INC 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 MAGNUM DCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAGNUM DCORP INC has no effect on the direction of Franco Nevada i.e., Franco Nevada and MAGNUM DCORP go up and down completely randomly.

Pair Corralation between Franco Nevada and MAGNUM DCORP

Assuming the 90 days horizon Franco Nevada is expected to under-perform the MAGNUM DCORP. But the stock apears to be less risky and, when comparing its historical volatility, Franco Nevada is 25.93 times less risky than MAGNUM DCORP. The stock trades about -0.08 of its potential returns per unit of risk. The MAGNUM DCORP INC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5.25  in MAGNUM DCORP INC on September 22, 2024 and sell it today you would lose (2.04) from holding MAGNUM DCORP INC or give up 38.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Franco Nevada  vs.  MAGNUM DCORP INC

Franco Nevada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franco Nevada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Franco Nevada is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MAGNUM DCORP INC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MAGNUM DCORP INC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, MAGNUM DCORP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franco Nevada and MAGNUM DCORP

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

The idea behind Franco Nevada and MAGNUM DCORP INC 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.

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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.