Correlation Between IGO and ERAMET SA
Can any of the company-specific risk be diversified away by investing in both IGO and ERAMET SA 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 ERAMET SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and ERAMET SA, you can compare the effects of market volatilities on IGO and ERAMET SA 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 ERAMET SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and ERAMET SA.
Diversification Opportunities for IGO and ERAMET SA
Very weak diversification
The 3 months correlation between IGO and ERAMET is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and ERAMET SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ERAMET SA 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 ERAMET SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ERAMET SA has no effect on the direction of IGO i.e., IGO and ERAMET SA go up and down completely randomly.
Pair Corralation between IGO and ERAMET SA
Assuming the 90 days horizon IGO Limited is expected to generate 1.65 times more return on investment than ERAMET SA. However, IGO is 1.65 times more volatile than ERAMET SA. It trades about -0.02 of its potential returns per unit of risk. ERAMET SA is currently generating about -0.13 per unit of risk. If you would invest 480.00 in IGO Limited on September 1, 2024 and sell it today you would lose (159.00) from holding IGO Limited or give up 33.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
IGO Limited vs. ERAMET SA
Performance |
| Timeline |
| IGO Limited |
| ERAMET SA |
IGO and ERAMET SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and ERAMET SA
The main advantage of trading using opposite IGO and ERAMET SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, ERAMET SA 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 ERAMET SA will offset losses from the drop in ERAMET SA's long position.| IGO vs. Grid Metals Corp | IGO vs. First American Silver | IGO vs. Qubec Nickel Corp | IGO vs. Lithium Australia NL |
| ERAMET SA vs. Iluka Resources Ltd | ERAMET SA vs. Giyani Metals Corp | ERAMET SA vs. IGO Limited | ERAMET SA vs. Grid Metals 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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