Correlation Between Agnico Eagle and Royal Canadian

Can any of the company-specific risk be diversified away by investing in both Agnico Eagle and Royal Canadian 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 Agnico Eagle and Royal Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Agnico Eagle Mines and Royal Canadian Mint, you can compare the effects of market volatilities on Agnico Eagle and Royal Canadian 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 Agnico Eagle with a short position of Royal Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agnico Eagle and Royal Canadian.

Diversification Opportunities for Agnico Eagle and Royal Canadian

0.92

Correlation Coefficient

Agnico Eagle  Royal Canadian

Almost no diversification

The 3 months correlation between Agnico and Royal is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Agnico Eagle Mines and Royal Canadian Mint in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Canadian Mint and Agnico Eagle 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 Agnico Eagle Mines are associated (or correlated) with Royal Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Canadian Mint has no effect on the direction of Agnico Eagle i.e., Agnico Eagle and Royal Canadian go up and down completely randomly.

Pair Corralation between Agnico Eagle and Royal Canadian

Assuming the 90 days trading horizon Agnico Eagle Mines is expected to generate 1.41 times more return on investment than Royal Canadian. However, Agnico Eagle is 1.41 times more volatile than Royal Canadian Mint. It trades about 0.29 of its potential returns per unit of risk. Royal Canadian Mint is currently generating about 0.22 per unit of risk. If you would invest  11,146  in Agnico Eagle Mines on December 29, 2024 and sell it today you would earn a total of  4,233  from holding Agnico Eagle Mines or generate 37.98% return on investment over 90 days.

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

Agnico Eagle Mines  vs.  Royal Canadian Mint

Agnico Eagle Mines

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Agnico Eagle displayed solid returns over the last few months and may actually be approaching a breakup point.

Royal Canadian Mint

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Canadian Mint are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Royal Canadian displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agnico Eagle and Royal Canadian

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

The idea behind Agnico Eagle Mines and Royal Canadian Mint 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.