Correlation Between MAS Gold and Franco Nevada

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

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

Diversification Opportunities for MAS Gold and Franco Nevada

0.05

Correlation Coefficient

MAS Gold  Franco Nevada

Significant diversification

The 3 months correlation between MAS and Franco is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding MAS Gold Corp and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and MAS Gold 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 MAS Gold Corp 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 MAS Gold i.e., MAS Gold and Franco Nevada go up and down completely randomly.

Pair Corralation between MAS Gold and Franco Nevada

Assuming the 90 days horizon MAS Gold Corp is expected to generate 12.48 times more return on investment than Franco Nevada. However, MAS Gold is 12.48 times more volatile than Franco Nevada. It trades about 0.08 of its potential returns per unit of risk. Franco Nevada is currently generating about 0.0 per unit of risk. If you would invest  2.67  in MAS Gold Corp on September 24, 2024 and sell it today you would lose (0.67) from holding MAS Gold Corp or give up 25.09% of portfolio value over 90 days.

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

MAS Gold Corp  vs.  Franco Nevada

MAS Gold Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MAS Gold Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, MAS Gold 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 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.

Pair Trading with MAS Gold and Franco Nevada

The main advantage of trading using opposite MAS Gold and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAS Gold 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 MAS Gold Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.