Correlation Between Equinox Gold and IAMGold

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

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

Diversification Opportunities for Equinox Gold and IAMGold

0.74

Correlation Coefficient

Equinox Gold  IAMGold

Poor diversification

The 3 months correlation between Equinox and IAMGold is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Equinox Gold Corp and IAMGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAMGold and Equinox 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 Equinox Gold Corp 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 Equinox Gold i.e., Equinox Gold and IAMGold go up and down completely randomly.

Pair Corralation between Equinox Gold and IAMGold

Considering the 90-day investment horizon Equinox Gold Corp is expected to generate 0.98 times more return on investment than IAMGold. However, Equinox Gold Corp is 1.02 times less risky than IAMGold. It trades about 0.18 of its potential returns per unit of risk. IAMGold is currently generating about 0.11 per unit of risk. If you would invest  506.00  in Equinox Gold Corp on December 19, 2024 and sell it today you would earn a total of  188.00  from holding Equinox Gold Corp or generate 37.15% return on investment over 90 days.

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

Equinox Gold Corp  vs.  IAMGold

Equinox Gold Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equinox Gold Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Equinox Gold showed solid returns over the last few months and may actually be approaching a breakup point.

IAMGold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IAMGold are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, IAMGold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equinox Gold and IAMGold

The main advantage of trading using opposite Equinox Gold and IAMGold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinox Gold 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 Equinox Gold Corp 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.