Correlation Between Hycroft Mining and Franco Nevada

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

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

Diversification Opportunities for Hycroft Mining and Franco Nevada

0.26

Correlation Coefficient

Hycroft Mining  Franco Nevada

Modest diversification

The 3 months correlation between Hycroft and Franco is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Hycroft Mining Holding and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and Hycroft Mining 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 Hycroft Mining Holding are associated (or correlated) with Franco Nevada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franco Nevada has no effect on the direction of Hycroft Mining i.e., Hycroft Mining and Franco Nevada go up and down completely randomly.

Pair Corralation between Hycroft Mining and Franco Nevada

Assuming the 90 days horizon Hycroft Mining Holding is expected to generate 8.85 times more return on investment than Franco Nevada. However, Hycroft Mining is 8.85 times more volatile than Franco Nevada. It trades about 0.07 of its potential returns per unit of risk. Franco Nevada is currently generating about -0.06 per unit of risk. If you would invest  1.36  in Hycroft Mining Holding on October 22, 2024 and sell it today you would lose (0.14) from holding Hycroft Mining Holding or give up 10.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Hycroft Mining Holding  vs.  Franco Nevada

Hycroft Mining Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hycroft Mining Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental indicators, Hycroft Mining showed solid returns over the last few months and may actually be approaching a breakup point.

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 latest unsteady performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Hycroft Mining and Franco Nevada

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

The idea behind Hycroft Mining Holding and Franco Nevada 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.