Correlation Between Dakota Gold and IAMGold

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

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

Diversification Opportunities for Dakota Gold and IAMGold

0.88

Correlation Coefficient

Dakota Gold  IAMGold

Very poor diversification

The 3 months correlation between Dakota and IAMGold is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dakota Gold Corp and IAMGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAMGold and Dakota Gold 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 Dakota Gold Corp 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 Dakota Gold i.e., Dakota Gold and IAMGold go up and down completely randomly.

Pair Corralation between Dakota Gold and IAMGold

Allowing for the 90-day total investment horizon Dakota Gold Corp is expected to generate 0.99 times more return on investment than IAMGold. However, Dakota Gold Corp is 1.01 times less risky than IAMGold. It trades about 0.27 of its potential returns per unit of risk. IAMGold is currently generating about 0.14 per unit of risk. If you would invest  245.00  in Dakota Gold Corp on March 2, 2024 and sell it today you would earn a total of  60.00  from holding Dakota Gold Corp or generate 24.49% return on investment over 90 days.

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

Dakota Gold Corp  vs.  IAMGold

Dakota Gold Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dakota Gold Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Dakota Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

IAMGold

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IAMGold are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, IAMGold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dakota Gold and IAMGold

The main advantage of trading using opposite Dakota Gold and IAMGold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dakota Gold 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 Dakota Gold Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.