Correlation Between Dundee Precious and IAMGold

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

By analyzing existing cross correlation between Dundee Precious Metals and IAMGold, you can compare the effects of market volatilities on Dundee Precious and IAMGold 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 Dundee Precious with a short position of IAMGold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dundee Precious and IAMGold.

Diversification Opportunities for Dundee Precious and IAMGold

0.15

Correlation Coefficient

Dundee Precious  IAMGold

Average diversification

The 3 months correlation between Dundee and IAMGold is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Dundee Precious Metals and IAMGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAMGold and Dundee Precious 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 Dundee Precious Metals are associated (or correlated) with IAMGold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAMGold has no effect on the direction of Dundee Precious i.e., Dundee Precious and IAMGold go up and down completely randomly.

Pair Corralation between Dundee Precious and IAMGold

Assuming the 90 days horizon Dundee Precious Metals is expected to under-perform the IAMGold. But the pink sheet apears to be less risky and, when comparing its historical volatility, Dundee Precious Metals is 2.26 times less risky than IAMGold. The pink sheet trades about -0.04 of its potential returns per unit of risk. The IAMGold is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  535.00  in IAMGold on September 12, 2024 and sell it today you would earn a total of  19.00  from holding IAMGold or generate 3.55% return on investment over 90 days.

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

Dundee Precious Metals  vs.  IAMGold

Dundee Precious Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

IAMGold

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IAMGold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, IAMGold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dundee Precious and IAMGold

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

The idea behind Dundee Precious Metals and IAMGold 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.