Correlation Between Excelsior Mining and Franco Nevada

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

Diversification Opportunities for Excelsior Mining and Franco Nevada

-0.22

Correlation Coefficient

Excelsior Mining  Franco Nevada

Very good diversification

The 3 months correlation between Excelsior and Franco is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Excelsior Mining Corp and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and Excelsior 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 Excelsior Mining 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 Excelsior Mining i.e., Excelsior Mining and Franco Nevada go up and down completely randomly.

Pair Corralation between Excelsior Mining and Franco Nevada

Assuming the 90 days trading horizon Excelsior Mining Corp is expected to generate 4.59 times more return on investment than Franco Nevada. However, Excelsior Mining is 4.59 times more volatile than Franco Nevada. It trades about 0.09 of its potential returns per unit of risk. Franco Nevada is currently generating about 0.06 per unit of risk. If you would invest  16.00  in Excelsior Mining Corp on October 10, 2024 and sell it today you would earn a total of  5.00  from holding Excelsior Mining Corp or generate 31.25% return on investment over 90 days.

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

Excelsior Mining Corp  vs.  Franco Nevada

Excelsior Mining Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Excelsior Mining Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Excelsior Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Franco Nevada

Risk-Adjusted Performance

0 of 100

Insignificant

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 current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Excelsior Mining and Franco Nevada

The main advantage of trading using opposite Excelsior Mining and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Excelsior 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 Excelsior Mining 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.