Correlation Between IGO and Northern Graphite
Can any of the company-specific risk be diversified away by investing in both IGO and Northern Graphite 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 Northern Graphite into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and Northern Graphite, you can compare the effects of market volatilities on IGO and Northern Graphite 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 Northern Graphite. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and Northern Graphite.
Diversification Opportunities for IGO and Northern Graphite
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IGO and Northern is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Northern Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Graphite 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 Northern Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Graphite has no effect on the direction of IGO i.e., IGO and Northern Graphite go up and down completely randomly.
Pair Corralation between IGO and Northern Graphite
Assuming the 90 days horizon IGO Limited is expected to under-perform the Northern Graphite. But the pink sheet apears to be less risky and, when comparing its historical volatility, IGO Limited is 25.62 times less risky than Northern Graphite. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Northern Graphite is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 7.00 in Northern Graphite on August 28, 2024 and sell it today you would lose (1.00) from holding Northern Graphite or give up 14.29% 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. Northern Graphite
Performance |
| Timeline |
| IGO Limited |
| Northern Graphite |
IGO and Northern Graphite Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and Northern Graphite
The main advantage of trading using opposite IGO and Northern Graphite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, Northern Graphite 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 Northern Graphite will offset losses from the drop in Northern Graphite's long position.The idea behind IGO Limited and Northern Graphite 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.| Northern Graphite vs. Focus Graphite | Northern Graphite vs. Mason Graphite | Northern Graphite vs. Graphite One | Northern Graphite vs. Syrah Resources Limited |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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