Correlation Between Pan American and IAMGold
Can any of the company-specific risk be diversified away by investing in both Pan American 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 Pan American and IAMGold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pan American Silver and IAMGold, you can compare the effects of market volatilities on Pan American 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 Pan American with a short position of IAMGold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan American and IAMGold.
Diversification Opportunities for Pan American and IAMGold
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pan and IAMGold is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and IAMGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAMGold and Pan American 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 Pan American Silver 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 Pan American i.e., Pan American and IAMGold go up and down completely randomly.
Pair Corralation between Pan American and IAMGold
Given the investment horizon of 90 days Pan American is expected to generate 9.0 times less return on investment than IAMGold. But when comparing it to its historical volatility, Pan American Silver is 1.25 times less risky than IAMGold. It trades about 0.01 of its potential returns per unit of risk. IAMGold is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 402.00 in IAMGold on August 28, 2024 and sell it today you would earn a total of 131.00 from holding IAMGold or generate 32.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pan American Silver vs. IAMGold
Performance |
| Timeline |
| Pan American Silver |
| IAMGold |
Pan American and IAMGold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pan American and IAMGold
The main advantage of trading using opposite Pan American and IAMGold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan American 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.| Pan American vs. Newmont Goldcorp Corp | Pan American vs. Wheaton Precious Metals | Pan American vs. Franco Nevada | Pan American vs. Kinross Gold |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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