Correlation Between Daito Trust and Franco Nevada

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

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

Diversification Opportunities for Daito Trust and Franco Nevada

-0.9

Correlation Coefficient

Daito Trust  Franco Nevada

Pay attention - limited upside

The 3 months correlation between Daito and Franco is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and Daito Trust 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 Daito Trust Construction 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 Daito Trust i.e., Daito Trust and Franco Nevada go up and down completely randomly.

Pair Corralation between Daito Trust and Franco Nevada

Assuming the 90 days horizon Daito Trust Construction is expected to under-perform the Franco Nevada. But the stock apears to be less risky and, when comparing its historical volatility, Daito Trust Construction is 1.41 times less risky than Franco Nevada. The stock trades about -0.17 of its potential returns per unit of risk. The Franco Nevada is currently generating about 0.27 of returns per unit of risk over similar time horizon. 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

Daito Trust Construction  vs.  Franco Nevada

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.

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.

Pair Trading with Daito Trust and Franco Nevada

The main advantage of trading using opposite Daito Trust and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daito Trust 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 Daito Trust Construction 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.