Correlation Between Mastercard and IAMGold

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

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

Diversification Opportunities for Mastercard and IAMGold

0.23

Correlation Coefficient

Mastercard  IAMGold

Modest diversification

The 3 months correlation between Mastercard and IAMGold is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and IAMGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAMGold and Mastercard 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 Mastercard 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 Mastercard i.e., Mastercard and IAMGold go up and down completely randomly.

Pair Corralation between Mastercard and IAMGold

Allowing for the 90-day total investment horizon Mastercard is expected to under-perform the IAMGold. But the stock apears to be less risky and, when comparing its historical volatility, Mastercard is 3.4 times less risky than IAMGold. The stock trades about -0.11 of its potential returns per unit of risk. The IAMGold is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  554.00  in IAMGold on October 9, 2024 and sell it today you would lose (15.00) from holding IAMGold or give up 2.71% of portfolio value over 90 days.

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

Mastercard  vs.  IAMGold

Mastercard

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mastercard is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

IAMGold

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IAMGold are ranked lower than 7 (%) 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.

Pair Trading with Mastercard and IAMGold

The main advantage of trading using opposite Mastercard and IAMGold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard 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 Mastercard 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .