Correlation Between Franco Nevada and Evolution Mining

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

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

Diversification Opportunities for Franco Nevada and Evolution Mining

0.74

Correlation Coefficient

Franco Nevada  Evolution Mining

Poor diversification

The 3 months correlation between Franco and Evolution is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and Evolution Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining 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 Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of Franco Nevada i.e., Franco Nevada and Evolution Mining go up and down completely randomly.

Pair Corralation between Franco Nevada and Evolution Mining

Assuming the 90 days horizon Franco Nevada is expected to under-perform the Evolution Mining. But the stock apears to be less risky and, when comparing its historical volatility, Franco Nevada is 1.63 times less risky than Evolution Mining. The stock trades about -0.08 of its potential returns per unit of risk. The Evolution Mining Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  445.00  in Evolution Mining Limited on April 23, 2025 and sell it today you would lose (34.00) from holding Evolution Mining Limited or give up 7.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Franco Nevada  vs.  Evolution Mining Limited

Franco Nevada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franco Nevada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Evolution Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolution Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Evolution Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Franco Nevada and Evolution Mining

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

The idea behind Franco Nevada and Evolution Mining Limited 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.