Correlation Between IGO and South32
Can any of the company-specific risk be diversified away by investing in both IGO and South32 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 South32 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and South32 Limited, you can compare the effects of market volatilities on IGO and South32 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 South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and South32.
Diversification Opportunities for IGO and South32
Very weak diversification
The 3 months correlation between IGO and South32 is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and South32 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 Limited 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 South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 Limited has no effect on the direction of IGO i.e., IGO and South32 go up and down completely randomly.
Pair Corralation between IGO and South32
Assuming the 90 days horizon IGO Limited is expected to generate 0.2 times more return on investment than South32. However, IGO Limited is 5.03 times less risky than South32. It trades about -0.21 of its potential returns per unit of risk. South32 Limited is currently generating about -0.1 per unit of risk. If you would invest 695.00 in IGO Limited on August 29, 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IGO Limited vs. South32 Limited
Performance |
| Timeline |
| IGO Limited |
| South32 Limited |
IGO and South32 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and South32
The main advantage of trading using opposite IGO and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.| IGO vs. Rockridge Resources | IGO vs. Ameriwest Lithium | IGO vs. Osisko Metals Incorporated | IGO vs. Volt Lithium Corp |
| South32 vs. Rockridge Resources | South32 vs. Ameriwest Lithium | South32 vs. Osisko Metals Incorporated | South32 vs. Volt Lithium Corp |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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