Correlation Between Franco Nevada and Hycroft Mining

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

Diversification Opportunities for Franco Nevada and Hycroft Mining

0.49

Correlation Coefficient

Franco Nevada  Hycroft Mining

Very weak diversification

The 3 months correlation between Franco and Hycroft is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and Hycroft Mining Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hycroft Mining Holding 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 Hycroft Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hycroft Mining Holding has no effect on the direction of Franco Nevada i.e., Franco Nevada and Hycroft Mining go up and down completely randomly.

Pair Corralation between Franco Nevada and Hycroft Mining

Considering the 90-day investment horizon Franco Nevada is expected to generate 6.53 times less return on investment than Hycroft Mining. But when comparing it to its historical volatility, Franco Nevada is 7.5 times less risky than Hycroft Mining. It trades about 0.05 of its potential returns per unit of risk. Hycroft Mining Holding is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2.80  in Hycroft Mining Holding on October 7, 2024 and sell it today you would lose (1.40) from holding Hycroft Mining Holding or give up 50.0% of portfolio value over 90 days.

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

Franco Nevada  vs.  Hycroft Mining Holding

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 fairly stable basic indicators, Franco Nevada is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Hycroft Mining Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hycroft Mining Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Franco Nevada and Hycroft Mining

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

The idea behind Franco Nevada and Hycroft Mining Holding 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.