Correlation Between IGO and United Tractors
Can any of the company-specific risk be diversified away by investing in both IGO and United Tractors 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 United Tractors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and United Tractors Tbk, you can compare the effects of market volatilities on IGO and United Tractors 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 United Tractors. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and United Tractors.
Diversification Opportunities for IGO and United Tractors
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between IGO and United is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and United Tractors Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Tractors Tbk 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 United Tractors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Tractors Tbk has no effect on the direction of IGO i.e., IGO and United Tractors go up and down completely randomly.
Pair Corralation between IGO and United Tractors
Assuming the 90 days horizon IGO Limited is expected to generate 1.2 times more return on investment than United Tractors. However, IGO is 1.2 times more volatile than United Tractors Tbk. It trades about 0.13 of its potential returns per unit of risk. United Tractors Tbk is currently generating about 0.0 per unit of risk. If you would invest 609.00 in IGO Limited on September 3, 2024 and sell it today you would earn a total of 71.00 from holding IGO Limited or generate 11.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
IGO Limited vs. United Tractors Tbk
Performance |
| Timeline |
| IGO Limited |
| United Tractors Tbk |
IGO and United Tractors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and United Tractors
The main advantage of trading using opposite IGO and United Tractors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, United Tractors 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 United Tractors will offset losses from the drop in United Tractors' long position.| IGO vs. Qubec Nickel Corp | IGO vs. Nickel Mines Limited | IGO vs. Mineral Resources Limited | IGO vs. Surge Copper Corp |
| United Tractors vs. Qubec Nickel Corp | United Tractors vs. IGO Limited | United Tractors vs. Avarone Metals | United Tractors 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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