Correlation Between IAMGold and GoldMining

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

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

Diversification Opportunities for IAMGold and GoldMining

-0.01

Correlation Coefficient

IAMGold  GoldMining

Good diversification

The 3 months correlation between IAMGold and GoldMining is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding IAMGold and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining and IAMGold 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 IAMGold are associated (or correlated) with GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of IAMGold i.e., IAMGold and GoldMining go up and down completely randomly.

Pair Corralation between IAMGold and GoldMining

Considering the 90-day investment horizon IAMGold is expected to generate 1.3 times more return on investment than GoldMining. However, IAMGold is 1.3 times more volatile than GoldMining. It trades about 0.02 of its potential returns per unit of risk. GoldMining is currently generating about -0.03 per unit of risk. If you would invest  543.00  in IAMGold on December 1, 2024 and sell it today you would earn a total of  9.00  from holding IAMGold or generate 1.66% return on investment over 90 days.

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

IAMGold  vs.  GoldMining

IAMGold

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IAMGold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IAMGold is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

GoldMining

Risk-Adjusted Performance

Very Weak

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

Pair Trading with IAMGold and GoldMining

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

The idea behind IAMGold and GoldMining 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.