Correlation Between Euro Manganese and IGO
Can any of the company-specific risk be diversified away by investing in both Euro Manganese and IGO 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 Euro Manganese and IGO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Euro Manganese and IGO Limited, you can compare the effects of market volatilities on Euro Manganese and IGO 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 Euro Manganese with a short position of IGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Euro Manganese and IGO.
Diversification Opportunities for Euro Manganese and IGO
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Euro and IGO is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Euro Manganese and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited and Euro Manganese 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 Euro Manganese are associated (or correlated) with IGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGO Limited has no effect on the direction of Euro Manganese i.e., Euro Manganese and IGO go up and down completely randomly.
Pair Corralation between Euro Manganese and IGO
Assuming the 90 days horizon Euro Manganese is expected to under-perform the IGO. In addition to that, Euro Manganese is 16.21 times more volatile than IGO Limited. It trades about -0.1 of its total potential returns per unit of risk. IGO Limited is currently generating about -0.22 per unit of volatility. If you would invest 695.00 in IGO Limited on August 28, 2024 and sell it today you would lose (15.00) from holding IGO Limited or give up 2.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Euro Manganese vs. IGO Limited
Performance |
| Timeline |
| Euro Manganese |
| IGO Limited |
Euro Manganese and IGO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Euro Manganese and IGO
The main advantage of trading using opposite Euro Manganese and IGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Euro Manganese position performs unexpectedly, IGO 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 IGO will offset losses from the drop in IGO's long position.The idea behind Euro Manganese and IGO Limited 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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