Correlation Between IGO and Lithium Australia
Can any of the company-specific risk be diversified away by investing in both IGO and Lithium Australia 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 Lithium Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and Lithium Australia NL, you can compare the effects of market volatilities on IGO and Lithium Australia 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 Lithium Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and Lithium Australia.
Diversification Opportunities for IGO and Lithium Australia
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between IGO and Lithium is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Lithium Australia NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Australia 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 Lithium Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Australia has no effect on the direction of IGO i.e., IGO and Lithium Australia go up and down completely randomly.
Pair Corralation between IGO and Lithium Australia
Assuming the 90 days horizon IGO Limited is expected to under-perform the Lithium Australia. But the pink sheet apears to be less risky and, when comparing its historical volatility, IGO Limited is 50.55 times less risky than Lithium Australia. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Lithium Australia NL is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 0.79 in Lithium Australia NL on August 29, 2024 and sell it today you would earn a total of 0.36 from holding Lithium Australia NL or generate 45.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IGO Limited vs. Lithium Australia NL
Performance |
| Timeline |
| IGO Limited |
| Lithium Australia |
IGO and Lithium Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and Lithium Australia
The main advantage of trading using opposite IGO and Lithium Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, Lithium Australia 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 Lithium Australia will offset losses from the drop in Lithium Australia's long position.| IGO vs. Grid Metals Corp | IGO vs. First American Silver | IGO vs. Qubec Nickel Corp | IGO vs. Lithium Australia NL |
| Lithium Australia vs. Grid Metals Corp | Lithium Australia vs. Latin Metals | Lithium Australia vs. First American Silver | Lithium Australia vs. IGO Limited |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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