Correlation Between IAMGold and Gold Resource

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

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

Diversification Opportunities for IAMGold and Gold Resource

0.24

Correlation Coefficient

IAMGold  Gold Resource

Modest diversification

The 3 months correlation between IAMGold and Gold is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding IAMGold and Gold Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Resource 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 Gold Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Resource has no effect on the direction of IAMGold i.e., IAMGold and Gold Resource go up and down completely randomly.

Pair Corralation between IAMGold and Gold Resource

Considering the 90-day investment horizon IAMGold is expected to generate 4.22 times less return on investment than Gold Resource. But when comparing it to its historical volatility, IAMGold is 2.71 times less risky than Gold Resource. It trades about 0.14 of its potential returns per unit of risk. Gold Resource is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Gold Resource on December 28, 2024 and sell it today you would earn a total of  35.00  from holding Gold Resource or generate 152.17% return on investment over 90 days.

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

IAMGold  vs.  Gold Resource

IAMGold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IAMGold are ranked lower than 10 (%) 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.

Gold Resource

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Resource are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Gold Resource displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IAMGold and Gold Resource

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

The idea behind IAMGold and Gold Resource 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.