Correlation Between IGO and Vulcan Energy
Can any of the company-specific risk be diversified away by investing in both IGO and Vulcan Energy 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 Vulcan Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and Vulcan Energy Resources, you can compare the effects of market volatilities on IGO and Vulcan Energy 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 Vulcan Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and Vulcan Energy.
Diversification Opportunities for IGO and Vulcan Energy
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IGO and Vulcan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Vulcan Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Energy 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 Vulcan Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Energy Resources has no effect on the direction of IGO i.e., IGO and Vulcan Energy go up and down completely randomly.
Pair Corralation between IGO and Vulcan Energy
Assuming the 90 days horizon IGO Limited is expected to under-perform the Vulcan Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, IGO Limited is 1.98 times less risky than Vulcan Energy. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Vulcan Energy Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 425.00 in Vulcan Energy Resources on September 12, 2024 and sell it today you would earn a total of 3.00 from holding Vulcan Energy Resources or generate 0.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IGO Limited vs. Vulcan Energy Resources
Performance |
| Timeline |
| IGO Limited |
| Vulcan Energy Resources |
IGO and Vulcan Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and Vulcan Energy
The main advantage of trading using opposite IGO and Vulcan Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, Vulcan Energy 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 Vulcan Energy will offset losses from the drop in Vulcan Energy's long position.| IGO vs. Qubec Nickel Corp | IGO vs. Nickel Mines Limited | IGO vs. Mineral Resources Limited | IGO vs. Surge Copper Corp |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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