Correlation Between IGO and Frontier Lithium
Can any of the company-specific risk be diversified away by investing in both IGO and Frontier Lithium 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 Frontier Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and Frontier Lithium, you can compare the effects of market volatilities on IGO and Frontier Lithium 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 Frontier Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and Frontier Lithium.
Diversification Opportunities for IGO and Frontier Lithium
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IGO and Frontier is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Frontier Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Lithium 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 Frontier Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Lithium has no effect on the direction of IGO i.e., IGO and Frontier Lithium go up and down completely randomly.
Pair Corralation between IGO and Frontier Lithium
Assuming the 90 days horizon IGO Limited is expected to generate 1.94 times more return on investment than Frontier Lithium. However, IGO is 1.94 times more volatile than Frontier Lithium. It trades about 0.02 of its potential returns per unit of risk. Frontier Lithium is currently generating about -0.04 per unit of risk. If you would invest 1,060 in IGO Limited on August 29, 2024 and sell it today you would lose (720.00) from holding IGO Limited or give up 67.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 93.15% |
| Values | Daily Returns |
IGO Limited vs. Frontier Lithium
Performance |
| Timeline |
| IGO Limited |
| Frontier Lithium |
IGO and Frontier Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and Frontier Lithium
The main advantage of trading using opposite IGO and Frontier Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, Frontier Lithium 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 Frontier Lithium will offset losses from the drop in Frontier Lithium's long position.| IGO vs. Grid Metals Corp | IGO vs. First American Silver | IGO vs. Qubec Nickel Corp | IGO vs. Lithium Australia NL |
| Frontier Lithium vs. Vision Lithium | Frontier Lithium vs. Critical Elements | Frontier Lithium vs. Cypress Development Corp | Frontier Lithium vs. Core Lithium |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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