Correlation Between Franco Nevada and Orla Mining

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

Diversification Opportunities for Franco Nevada and Orla Mining

0.5

Correlation Coefficient

Franco Nevada  Orla Mining

Very weak diversification

The 3 months correlation between Franco and Orla is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and Orla Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orla Mining 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 Orla Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orla Mining has no effect on the direction of Franco Nevada i.e., Franco Nevada and Orla Mining go up and down completely randomly.

Pair Corralation between Franco Nevada and Orla Mining

Considering the 90-day investment horizon Franco Nevada is expected to under-perform the Orla Mining. But the stock apears to be less risky and, when comparing its historical volatility, Franco Nevada is 1.98 times less risky than Orla Mining. The stock trades about -0.01 of its potential returns per unit of risk. The Orla Mining is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  429.00  in Orla Mining on September 12, 2024 and sell it today you would earn a total of  118.00  from holding Orla Mining or generate 27.51% return on investment over 90 days.

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

Franco Nevada  vs.  Orla Mining

Franco Nevada

Risk-Adjusted Performance

0 of 100

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 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.

Orla Mining

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orla Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile essential indicators, Orla Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franco Nevada and Orla Mining

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

The idea behind Franco Nevada and Orla Mining 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.