Correlation Between Franco Nevada and Daito Trust

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

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

Diversification Opportunities for Franco Nevada and Daito Trust

-0.9

Correlation Coefficient

Franco Nevada  Daito Trust

Pay attention - limited upside

The 3 months correlation between Franco and Daito is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and Daito Trust Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daito Trust Construction 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 Daito Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daito Trust Construction has no effect on the direction of Franco Nevada i.e., Franco Nevada and Daito Trust go up and down completely randomly.

Pair Corralation between Franco Nevada and Daito Trust

Assuming the 90 days horizon Franco Nevada is expected to generate 1.41 times more return on investment than Daito Trust. However, Franco Nevada is 1.41 times more volatile than Daito Trust Construction. It trades about 0.27 of its potential returns per unit of risk. Daito Trust Construction is currently generating about -0.17 per unit of risk. If you would invest  11,086  in Franco Nevada on December 20, 2024 and sell it today you would earn a total of  3,224  from holding Franco Nevada or generate 29.08% return on investment over 90 days.

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

Franco Nevada  vs.  Daito Trust Construction

Franco Nevada

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franco Nevada are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Franco Nevada reported solid returns over the last few months and may actually be approaching a breakup point.

Daito Trust Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Daito Trust Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Franco Nevada and Daito Trust

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

The idea behind Franco Nevada and Daito Trust Construction 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.