Correlation Between IGO and Critical Elements
Can any of the company-specific risk be diversified away by investing in both IGO and Critical Elements 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 Critical Elements into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and Critical Elements, you can compare the effects of market volatilities on IGO and Critical Elements 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 Critical Elements. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and Critical Elements.
Diversification Opportunities for IGO and Critical Elements
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between IGO and Critical is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Critical Elements in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Critical Elements 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 Critical Elements. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Critical Elements has no effect on the direction of IGO i.e., IGO and Critical Elements go up and down completely randomly.
Pair Corralation between IGO and Critical Elements
Assuming the 90 days horizon IGO Limited is expected to generate 0.12 times more return on investment than Critical Elements. However, IGO Limited is 8.14 times less risky than Critical Elements. It trades about -0.21 of its potential returns per unit of risk. Critical Elements is currently generating about -0.42 per unit of risk. If you would invest 695.00 in IGO Limited on September 1, 2024 and sell it today you would lose (15.00) from holding IGO Limited or give up 2.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
IGO Limited vs. Critical Elements
Performance |
| Timeline |
| IGO Limited |
| Critical Elements |
IGO and Critical Elements Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and Critical Elements
The main advantage of trading using opposite IGO and Critical Elements positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, Critical Elements 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 Critical Elements will offset losses from the drop in Critical Elements' long position.The idea behind IGO Limited and Critical Elements 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.| Critical Elements vs. Argosy Minerals Limited | Critical Elements vs. Aurelia Metals Limited | Critical Elements vs. Artemis Resources | Critical Elements vs. Ascendant Resources |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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