Correlation Between IGO and Savannah Resources
Can any of the company-specific risk be diversified away by investing in both IGO and Savannah Resources 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 Savannah Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and Savannah Resources Plc, you can compare the effects of market volatilities on IGO and Savannah Resources 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 Savannah Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and Savannah Resources.
Diversification Opportunities for IGO and Savannah Resources
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between IGO and Savannah is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Savannah Resources Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Savannah Resources Plc 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 Savannah Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Savannah Resources Plc has no effect on the direction of IGO i.e., IGO and Savannah Resources go up and down completely randomly.
Pair Corralation between IGO and Savannah Resources
Assuming the 90 days horizon IGO is expected to generate 2.85 times less return on investment than Savannah Resources. But when comparing it to its historical volatility, IGO Limited is 1.04 times less risky than Savannah Resources. It trades about 0.02 of its potential returns per unit of risk. Savannah Resources Plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3.50 in Savannah Resources Plc on August 29, 2024 and sell it today you would earn a total of 0.49 from holding Savannah Resources Plc or generate 14.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 93.33% |
| Values | Daily Returns |
IGO Limited vs. Savannah Resources Plc
Performance |
| Timeline |
| IGO Limited |
| Savannah Resources Plc |
IGO and Savannah Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGO and Savannah Resources
The main advantage of trading using opposite IGO and Savannah Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, Savannah Resources 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 Savannah Resources will offset losses from the drop in Savannah Resources' long position.| IGO vs. Grid Metals Corp | IGO vs. First American Silver | IGO vs. Qubec Nickel Corp | IGO vs. Lithium Australia NL |
| Savannah Resources vs. Lithium Energi Exploration | Savannah Resources vs. Critical Elements | Savannah Resources vs. International Battery Metals | Savannah Resources vs. Talga Group |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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