Correlation Between IGO and Sumitomo Metal
Can any of the company-specific risk be diversified away by investing in both IGO and Sumitomo Metal 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 IGO and Sumitomo Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and Sumitomo Metal Mining, you can compare the effects of market volatilities on IGO and Sumitomo Metal 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 IGO with a short position of Sumitomo Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and Sumitomo Metal.
Diversification Opportunities for IGO and Sumitomo Metal
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IGO and Sumitomo is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Sumitomo Metal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Metal Mining and IGO 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 IGO Limited are associated (or correlated) with Sumitomo Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Metal Mining has no effect on the direction of IGO i.e., IGO and Sumitomo Metal go up and down completely randomly.
Pair Corralation between IGO and Sumitomo Metal
Assuming the 90 days horizon IGO Limited is expected to under-perform the Sumitomo Metal. In addition to that, IGO is 1.64 times more volatile than Sumitomo Metal Mining. It trades about -0.07 of its total potential returns per unit of risk. Sumitomo Metal Mining is currently generating about -0.03 per unit of volatility. If you would invest 837.00 in Sumitomo Metal Mining on September 12, 2024 and sell it today you would lose (220.00) from holding Sumitomo Metal Mining or give up 26.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IGO Limited vs. Sumitomo Metal Mining
Performance |
| Timeline |
| IGO Limited |
| Sumitomo Metal Mining |
IGO and Sumitomo Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and Sumitomo Metal
The main advantage of trading using opposite IGO and Sumitomo Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, Sumitomo Metal 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 Sumitomo Metal will offset losses from the drop in Sumitomo Metal's long position.| IGO vs. Qubec Nickel Corp | IGO vs. Nickel Mines Limited | IGO vs. Mineral Resources Limited | IGO vs. Surge Copper Corp |
| Sumitomo Metal vs. Qubec Nickel Corp | Sumitomo Metal vs. IGO Limited | Sumitomo Metal vs. Focus Graphite | Sumitomo Metal vs. Mineral Res |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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