Correlation Between Royal Gold and Franco Nevada

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

Diversification Opportunities for Royal Gold and Franco Nevada

0.8

Correlation Coefficient

Royal Gold  Franco Nevada

Very poor diversification

The 3 months correlation between Royal and Franco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Royal Gold and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada 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 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 Royal Gold i.e., Royal Gold and Franco Nevada go up and down completely randomly.

Pair Corralation between Royal Gold and Franco Nevada

Given the investment horizon of 90 days Royal Gold is expected to under-perform the Franco Nevada. In addition to that, Royal Gold is 1.13 times more volatile than Franco Nevada. It trades about -0.11 of its total potential returns per unit of risk. Franco Nevada is currently generating about -0.01 per unit of volatility. If you would invest  16,983  in Franco Nevada on May 7, 2025 and sell it today you would lose (313.00) from holding Franco Nevada or give up 1.84% of portfolio value over 90 days.

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

Royal Gold  vs.  Franco Nevada

Royal Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royal Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in September 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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. In spite of fairly stable basic indicators, Franco Nevada is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Royal Gold and Franco Nevada

The main advantage of trading using opposite Royal Gold and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal 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 Royal Gold 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..