Correlation Between Gold Fields and IAMGold

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

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

Diversification Opportunities for Gold Fields and IAMGold

0.92

Correlation Coefficient

Gold Fields  IAMGold

Almost no diversification

The 3 months correlation between Gold and IAMGold is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and IAMGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAMGold and Gold Fields 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 Gold Fields Ltd 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 Gold Fields i.e., Gold Fields and IAMGold go up and down completely randomly.

Pair Corralation between Gold Fields and IAMGold

Considering the 90-day investment horizon Gold Fields is expected to generate 1.75 times less return on investment than IAMGold. But when comparing it to its historical volatility, Gold Fields Ltd is 1.12 times less risky than IAMGold. It trades about 0.08 of its potential returns per unit of risk. IAMGold is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  232.00  in IAMGold on February 6, 2024 and sell it today you would earn a total of  141.00  from holding IAMGold or generate 60.78% return on investment over 90 days.

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

Gold Fields Ltd  vs.  IAMGold

Gold Fields

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gold Fields demonstrated solid returns over the last few months and may actually be approaching a breakup point.

IAMGold

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IAMGold are ranked lower than 16 (%) 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 Gold Fields and IAMGold

The main advantage of trading using opposite Gold Fields and IAMGold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields 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 Gold Fields Ltd 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.