Correlation Between Royal Gold and Agnico Eagle

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

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

Diversification Opportunities for Royal Gold and Agnico Eagle

0.95

Correlation Coefficient

Royal Gold  Agnico Eagle

Almost no diversification

The 3 months correlation between Royal and Agnico is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Royal Gold and Agnico Eagle Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agnico Eagle Mines and Royal 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 Royal Gold are associated (or correlated) with Agnico Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agnico Eagle Mines has no effect on the direction of Royal Gold i.e., Royal Gold and Agnico Eagle go up and down completely randomly.

Pair Corralation between Royal Gold and Agnico Eagle

Given the investment horizon of 90 days Royal Gold is expected to generate 1.57 times less return on investment than Agnico Eagle. But when comparing it to its historical volatility, Royal Gold is 1.28 times less risky than Agnico Eagle. It trades about 0.25 of its potential returns per unit of risk. Agnico Eagle Mines is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  7,752  in Agnico Eagle Mines on December 28, 2024 and sell it today you would earn a total of  3,031  from holding Agnico Eagle Mines or generate 39.1% return on investment over 90 days.

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

Royal Gold  vs.  Agnico Eagle Mines

Royal Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Gold are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Royal Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Agnico Eagle Mines

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Agnico Eagle displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Gold and Agnico Eagle

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

The idea behind Royal Gold and Agnico Eagle Mines 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.