Correlation Between IGO and LithiumBank Resources
Can any of the company-specific risk be diversified away by investing in both IGO and LithiumBank Resources 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 LithiumBank Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and LithiumBank Resources Corp, you can compare the effects of market volatilities on IGO and LithiumBank Resources 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 LithiumBank Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and LithiumBank Resources.
Diversification Opportunities for IGO and LithiumBank Resources
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between IGO and LithiumBank is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and LithiumBank Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LithiumBank Resources 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 LithiumBank Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LithiumBank Resources has no effect on the direction of IGO i.e., IGO and LithiumBank Resources go up and down completely randomly.
Pair Corralation between IGO and LithiumBank Resources
Assuming the 90 days horizon IGO Limited is expected to generate 0.74 times more return on investment than LithiumBank Resources. However, IGO Limited is 1.36 times less risky than LithiumBank Resources. It trades about -0.04 of its potential returns per unit of risk. LithiumBank Resources Corp is currently generating about -0.04 per unit of risk. If you would invest 1,697 in IGO Limited on August 31, 2024 and sell it today you would lose (1,017) from holding IGO Limited or give up 59.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IGO Limited vs. LithiumBank Resources Corp
Performance |
| Timeline |
| IGO Limited |
| LithiumBank Resources |
IGO and LithiumBank Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and LithiumBank Resources
The main advantage of trading using opposite IGO and LithiumBank Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, LithiumBank Resources 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 LithiumBank Resources will offset losses from the drop in LithiumBank Resources' long position.The idea behind IGO Limited and LithiumBank Resources Corp 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.| LithiumBank Resources vs. Liontown Resources Limited | LithiumBank Resources vs. ATT Inc | LithiumBank Resources vs. Merck Company | LithiumBank Resources vs. Walt Disney |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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