Correlation Between IGO and Australian Mines
Can any of the company-specific risk be diversified away by investing in both IGO and Australian Mines 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 Australian Mines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and Australian Mines Limited, you can compare the effects of market volatilities on IGO and Australian Mines 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 Australian Mines. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and Australian Mines.
Diversification Opportunities for IGO and Australian Mines
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IGO and Australian is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Australian Mines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Mines 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 Australian Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Mines has no effect on the direction of IGO i.e., IGO and Australian Mines go up and down completely randomly.
Pair Corralation between IGO and Australian Mines
Assuming the 90 days horizon IGO Limited is expected to under-perform the Australian Mines. But the pink sheet apears to be less risky and, when comparing its historical volatility, IGO Limited is 46.6 times less risky than Australian Mines. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Australian Mines Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1.42 in Australian Mines Limited on September 3, 2024 and sell it today you would lose (0.51) from holding Australian Mines Limited or give up 35.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IGO Limited vs. Australian Mines Limited
Performance |
| Timeline |
| IGO Limited |
| Australian Mines |
IGO and Australian Mines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and Australian Mines
The main advantage of trading using opposite IGO and Australian Mines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, Australian Mines 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 Australian Mines will offset losses from the drop in Australian Mines' long position.| IGO vs. Qubec Nickel Corp | IGO vs. Nickel Mines Limited | IGO vs. Mineral Resources Limited | IGO vs. Surge Copper Corp |
| Australian Mines vs. Qubec Nickel Corp | Australian Mines vs. IGO Limited | Australian Mines vs. Avarone Metals | Australian Mines vs. Adriatic Metals PLC |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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