Correlation Between IGO and Euro Manganese
Can any of the company-specific risk be diversified away by investing in both IGO and Euro Manganese 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 Euro Manganese into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and Euro Manganese, you can compare the effects of market volatilities on IGO and Euro Manganese 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 Euro Manganese. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and Euro Manganese.
Diversification Opportunities for IGO and Euro Manganese
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IGO and Euro is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Euro Manganese in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euro Manganese 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 Euro Manganese. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euro Manganese has no effect on the direction of IGO i.e., IGO and Euro Manganese go up and down completely randomly.
Pair Corralation between IGO and Euro Manganese
Assuming the 90 days horizon IGO Limited is expected to generate 0.06 times more return on investment than Euro Manganese. However, IGO Limited is 16.21 times less risky than Euro Manganese. It trades about -0.22 of its potential returns per unit of risk. Euro Manganese is currently generating about -0.1 per unit of risk. If you would invest 695.00 in IGO Limited on August 28, 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IGO Limited vs. Euro Manganese
Performance |
| Timeline |
| IGO Limited |
| Euro Manganese |
IGO and Euro Manganese Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and Euro Manganese
The main advantage of trading using opposite IGO and Euro Manganese positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, Euro Manganese 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 Euro Manganese will offset losses from the drop in Euro Manganese's long position.The idea behind IGO Limited and Euro Manganese 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.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 Transaction History module to view history of all your transactions and understand their impact on performance.
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