Correlation Between IMetal Resources and Imperial Metals

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

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

Diversification Opportunities for IMetal Resources and Imperial Metals

0.21

Correlation Coefficient

IMetal Resources  Imperial Metals

Modest diversification

The 3 months correlation between IMetal and Imperial is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding iMetal Resources and Imperial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Metals and IMetal Resources 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 iMetal Resources are associated (or correlated) with Imperial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Metals has no effect on the direction of IMetal Resources i.e., IMetal Resources and Imperial Metals go up and down completely randomly.

Pair Corralation between IMetal Resources and Imperial Metals

Assuming the 90 days horizon IMetal Resources is expected to generate 1.87 times less return on investment than Imperial Metals. In addition to that, IMetal Resources is 2.94 times more volatile than Imperial Metals. It trades about 0.04 of its total potential returns per unit of risk. Imperial Metals is currently generating about 0.23 per unit of volatility. If you would invest  178.00  in Imperial Metals on December 30, 2024 and sell it today you would earn a total of  92.00  from holding Imperial Metals or generate 51.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

iMetal Resources  vs.  Imperial Metals

iMetal Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iMetal Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, IMetal Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Imperial Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Metals are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Imperial Metals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IMetal Resources and Imperial Metals

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

The idea behind iMetal Resources and Imperial Metals 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 Anywhere module to track or share privately all of your investments from the convenience of any device.