Correlation Between HudBay Minerals and IAMGold

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

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

Diversification Opportunities for HudBay Minerals and IAMGold

0.4

Correlation Coefficient

HudBay Minerals  IAMGold

Very weak diversification

The 3 months correlation between HudBay and IAMGold is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding HudBay Minerals and IAMGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAMGold and HudBay Minerals 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 HudBay Minerals 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 HudBay Minerals i.e., HudBay Minerals and IAMGold go up and down completely randomly.

Pair Corralation between HudBay Minerals and IAMGold

Assuming the 90 days trading horizon HudBay Minerals is expected to generate 78.24 times less return on investment than IAMGold. In addition to that, HudBay Minerals is 1.05 times more volatile than IAMGold. It trades about 0.0 of its total potential returns per unit of risk. IAMGold is currently generating about 0.12 per unit of volatility. If you would invest  746.00  in IAMGold on December 27, 2024 and sell it today you would earn a total of  173.00  from holding IAMGold or generate 23.19% return on investment over 90 days.

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

HudBay Minerals  vs.  IAMGold

HudBay Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days HudBay Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, HudBay Minerals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

IAMGold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IAMGold are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IAMGold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HudBay Minerals and IAMGold

The main advantage of trading using opposite HudBay Minerals and IAMGold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HudBay Minerals 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 HudBay Minerals 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.