Correlation Between Franco Nevada and Seabridge Gold

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

Diversification Opportunities for Franco Nevada and Seabridge Gold

0.02

Correlation Coefficient

Franco Nevada  Seabridge Gold

Significant diversification

The 3 months correlation between Franco and Seabridge is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and Seabridge Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seabridge Gold 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 Seabridge Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seabridge Gold has no effect on the direction of Franco Nevada i.e., Franco Nevada and Seabridge Gold go up and down completely randomly.

Pair Corralation between Franco Nevada and Seabridge Gold

Considering the 90-day investment horizon Franco Nevada is expected to generate 0.42 times more return on investment than Seabridge Gold. However, Franco Nevada is 2.36 times less risky than Seabridge Gold. It trades about 0.32 of its potential returns per unit of risk. Seabridge Gold is currently generating about 0.04 per unit of risk. If you would invest  11,666  in Franco Nevada on December 30, 2024 and sell it today you would earn a total of  3,881  from holding Franco Nevada or generate 33.27% return on investment over 90 days.

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

Franco Nevada  vs.  Seabridge Gold

Franco Nevada

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Franco Nevada are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Franco Nevada showed solid returns over the last few months and may actually be approaching a breakup point.

Seabridge Gold

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Seabridge Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Seabridge Gold may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Franco Nevada and Seabridge Gold

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

The idea behind Franco Nevada and Seabridge Gold 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.