Correlation Between Agnico Eagle and Tanzanian Royalty

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

Diversification Opportunities for Agnico Eagle and Tanzanian Royalty

0.14

Correlation Coefficient

Agnico Eagle  Tanzanian Royalty

Average diversification

The 3 months correlation between Agnico and Tanzanian is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Agnico Eagle Mines and Tanzanian Royalty Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tanzanian Royalty 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 Tanzanian Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tanzanian Royalty has no effect on the direction of Agnico Eagle i.e., Agnico Eagle and Tanzanian Royalty go up and down completely randomly.

Pair Corralation between Agnico Eagle and Tanzanian Royalty

Considering the 90-day investment horizon Agnico Eagle Mines is expected to generate 0.82 times more return on investment than Tanzanian Royalty. However, Agnico Eagle Mines is 1.22 times less risky than Tanzanian Royalty. It trades about 0.04 of its potential returns per unit of risk. Tanzanian Royalty Exploration is currently generating about -0.06 per unit of risk. If you would invest  8,147  in Agnico Eagle Mines on September 12, 2024 and sell it today you would earn a total of  284.00  from holding Agnico Eagle Mines or generate 3.49% return on investment over 90 days.

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

Agnico Eagle Mines  vs.  Tanzanian Royalty Exploration

Agnico Eagle Mines

Risk-Adjusted Performance

2 of 100

Modest

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 latest stock price disarray, may contribute to short-term losses for the investors.

Tanzanian Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tanzanian Royalty Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Agnico Eagle and Tanzanian Royalty

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

The idea behind Agnico Eagle Mines and Tanzanian Royalty Exploration 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.