Correlation Between Franco Nevada and TMX Group

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

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

Diversification Opportunities for Franco Nevada and TMX Group

-0.63

Correlation Coefficient

Franco Nevada  TMX Group

Excellent diversification

The 3 months correlation between Franco and TMX is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and TMX Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMX Group Limited 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 TMX Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMX Group Limited has no effect on the direction of Franco Nevada i.e., Franco Nevada and TMX Group go up and down completely randomly.

Pair Corralation between Franco Nevada and TMX Group

Assuming the 90 days trading horizon Franco Nevada is expected to generate 1.42 times more return on investment than TMX Group. However, Franco Nevada is 1.42 times more volatile than TMX Group Limited. It trades about 0.1 of its potential returns per unit of risk. TMX Group Limited is currently generating about -0.12 per unit of risk. If you would invest  23,519  in Franco Nevada on August 3, 2025 and sell it today you would earn a total of  2,680  from holding Franco Nevada or generate 11.4% return on investment over 90 days.

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

Franco Nevada  vs.  TMX Group Limited

Franco Nevada

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Franco Nevada are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Franco Nevada may actually be approaching a critical reversion point that can send shares even higher in December 2025.

TMX Group Limited

Risk-Adjusted Performance

Weakest

Over the last 90 days TMX Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Franco Nevada and TMX Group

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

The idea behind Franco Nevada and TMX Group 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.