Correlation Between Franco Nevada and Dynasty Gold

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

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

Diversification Opportunities for Franco Nevada and Dynasty Gold

0.3

Correlation Coefficient

Franco Nevada  Dynasty Gold

Weak diversification

The 3 months correlation between Franco and Dynasty is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and Dynasty Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynasty Gold Corp and Franco Nevada 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 Franco Nevada are associated (or correlated) with Dynasty Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynasty Gold Corp has no effect on the direction of Franco Nevada i.e., Franco Nevada and Dynasty Gold go up and down completely randomly.

Pair Corralation between Franco Nevada and Dynasty Gold

Assuming the 90 days trading horizon Franco Nevada is expected to generate 2.53 times less return on investment than Dynasty Gold. But when comparing it to its historical volatility, Franco Nevada is 2.91 times less risky than Dynasty Gold. It trades about 0.13 of its potential returns per unit of risk. Dynasty Gold Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Dynasty Gold Corp on October 21, 2024 and sell it today you would earn a total of  2.00  from holding Dynasty Gold Corp or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.56%
Values	Daily Returns

Franco Nevada  vs.  Dynasty Gold Corp

Franco Nevada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franco Nevada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Franco Nevada is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Dynasty Gold Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dynasty Gold Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Dynasty Gold may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Franco Nevada and Dynasty Gold

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

The idea behind Franco Nevada and Dynasty Gold Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.