Correlation Between Fortescue Metals and IGO
Can any of the company-specific risk be diversified away by investing in both Fortescue Metals 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 Fortescue Metals and IGO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortescue Metals Group and IGO Limited, you can compare the effects of market volatilities on Fortescue Metals 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 Fortescue Metals with a short position of IGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and IGO.
Diversification Opportunities for Fortescue Metals and IGO
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fortescue and IGO is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited and Fortescue Metals 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 Fortescue Metals Group 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 Fortescue Metals i.e., Fortescue Metals and IGO go up and down completely randomly.
Pair Corralation between Fortescue Metals and IGO
Assuming the 90 days horizon Fortescue Metals Group is expected to under-perform the IGO. In addition to that, Fortescue Metals is 1.69 times more volatile than IGO Limited. It trades about -0.11 of its total potential returns per unit of risk. IGO Limited is currently generating about -0.07 per unit of volatility. If you would invest 348.00 in IGO Limited on August 30, 2024 and sell it today you would lose (8.00) from holding IGO Limited or give up 2.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortescue Metals Group vs. IGO Limited
Performance |
| Timeline |
| Fortescue Metals |
| IGO Limited |
Fortescue Metals and IGO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortescue Metals and IGO
The main advantage of trading using opposite Fortescue Metals and IGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortescue Metals 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.| Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Qubec Nickel Corp | Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Hannan Metals |
| IGO vs. Grid Metals Corp | IGO vs. First American Silver | IGO vs. Qubec Nickel Corp | IGO vs. Lithium Australia NL |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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