Correlation Between DAIRY FARM and Franco Nevada

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

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

Diversification Opportunities for DAIRY FARM and Franco Nevada

-0.32

Correlation Coefficient

DAIRY FARM  Franco Nevada

Very good diversification

The 3 months correlation between DAIRY and Franco is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and DAIRY FARM 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 DAIRY FARM INTL 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 DAIRY FARM i.e., DAIRY FARM and Franco Nevada go up and down completely randomly.

Pair Corralation between DAIRY FARM and Franco Nevada

Assuming the 90 days trading horizon DAIRY FARM INTL is expected to under-perform the Franco Nevada. In addition to that, DAIRY FARM is 1.32 times more volatile than Franco Nevada. It trades about -0.05 of its total potential returns per unit of risk. Franco Nevada is currently generating about 0.26 per unit of volatility. If you would invest  11,106  in Franco Nevada on December 21, 2024 and sell it today you would earn a total of  3,119  from holding Franco Nevada or generate 28.08% return on investment over 90 days.

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

DAIRY FARM INTL  vs.  Franco Nevada

DAIRY FARM INTL

Risk-Adjusted Performance

Very Weak

Over the last 90 days DAIRY FARM INTL 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 weak basic indicators, Franco Nevada reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DAIRY FARM and Franco Nevada

The main advantage of trading using opposite DAIRY FARM and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM 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 DAIRY FARM INTL 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.