Correlation Between Agnico Eagle and Orogen Royalties

Can any of the company-specific risk be diversified away by investing in both Agnico Eagle and Orogen Royalties 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 Orogen Royalties 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 Orogen Royalties, you can compare the effects of market volatilities on Agnico Eagle and Orogen Royalties 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 Orogen Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agnico Eagle and Orogen Royalties.

Diversification Opportunities for Agnico Eagle and Orogen Royalties

0.64

Correlation Coefficient

Agnico Eagle  Orogen Royalties

Poor diversification

The 3 months correlation between Agnico and Orogen is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Agnico Eagle Mines and Orogen Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orogen Royalties 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 Orogen Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orogen Royalties has no effect on the direction of Agnico Eagle i.e., Agnico Eagle and Orogen Royalties go up and down completely randomly.

Pair Corralation between Agnico Eagle and Orogen Royalties

Considering the 90-day investment horizon Agnico Eagle is expected to generate 1.21 times less return on investment than Orogen Royalties. But when comparing it to its historical volatility, Agnico Eagle Mines is 1.67 times less risky than Orogen Royalties. It trades about 0.37 of its potential returns per unit of risk. Orogen Royalties is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  94.00  in Orogen Royalties on October 25, 2024 and sell it today you would earn a total of  14.00  from holding Orogen Royalties or generate 14.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Agnico Eagle Mines  vs.  Orogen Royalties

Agnico Eagle Mines

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Agnico Eagle is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Orogen Royalties

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Agnico Eagle and Orogen Royalties

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

The idea behind Agnico Eagle Mines and Orogen Royalties 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 Global Correlations module to find global opportunities by holding instruments from different markets.