Correlation Between Franco Nevada and NeXGold Mining

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

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

Diversification Opportunities for Franco Nevada and NeXGold Mining

0.35

Correlation Coefficient

Franco Nevada  NeXGold Mining

Weak diversification

The 3 months correlation between Franco and NeXGold is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and NeXGold Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeXGold Mining 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 NeXGold Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeXGold Mining Corp has no effect on the direction of Franco Nevada i.e., Franco Nevada and NeXGold Mining go up and down completely randomly.

Pair Corralation between Franco Nevada and NeXGold Mining

Assuming the 90 days trading horizon Franco Nevada is expected to under-perform the NeXGold Mining. But the stock apears to be less risky and, when comparing its historical volatility, Franco Nevada is 2.4 times less risky than NeXGold Mining. The stock trades about -0.01 of its potential returns per unit of risk. The NeXGold Mining Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  64.00  in NeXGold Mining Corp on September 29, 2024 and sell it today you would earn a total of  2.00  from holding NeXGold Mining Corp or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Franco Nevada  vs.  NeXGold Mining Corp

Franco Nevada

Risk-Adjusted Performance

2 of 100

Weak

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

NeXGold Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NeXGold Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Franco Nevada and NeXGold Mining

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

The idea behind Franco Nevada and NeXGold Mining 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.