Correlation Between Iodm and Metals X

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

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

Diversification Opportunities for Iodm and Metals X

0.01

Correlation Coefficient

Iodm  Metals X

Significant diversification

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

Pair Corralation between Iodm and Metals X

Assuming the 90 days trading horizon Iodm is expected to generate 4.07 times less return on investment than Metals X. In addition to that, Iodm is 1.25 times more volatile than Metals X. It trades about 0.04 of its total potential returns per unit of risk. Metals X is currently generating about 0.22 per unit of volatility. If you would invest  40.00  in Metals X on December 21, 2024 and sell it today you would earn a total of  25.00  from holding Metals X or generate 62.5% return on investment over 90 days.

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

Iodm  vs.  Metals X

Iodm

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Iodm are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Iodm unveiled solid returns over the last few months and may actually be approaching a breakup point.

Metals X

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metals X are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metals X unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iodm and Metals X

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

The idea behind Iodm and Metals X 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.