Correlation Between Class 1 and IGO
Can any of the company-specific risk be diversified away by investing in both Class 1 and IGO 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 Class 1 and IGO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Class 1 Nickel and IGO Limited, you can compare the effects of market volatilities on Class 1 and IGO 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 Class 1 with a short position of IGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Class 1 and IGO.
Diversification Opportunities for Class 1 and IGO
Poor diversification
The 3 months correlation between Class and IGO is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Class 1 Nickel and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited and Class 1 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 Class 1 Nickel are associated (or correlated) with IGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGO Limited has no effect on the direction of Class 1 i.e., Class 1 and IGO go up and down completely randomly.
Pair Corralation between Class 1 and IGO
Assuming the 90 days horizon Class 1 Nickel is expected to generate 38.92 times more return on investment than IGO. However, Class 1 is 38.92 times more volatile than IGO Limited. It trades about 0.26 of its potential returns per unit of risk. IGO Limited is currently generating about -0.21 per unit of risk. If you would invest 8.80 in Class 1 Nickel on September 5, 2024 and sell it today you would earn a total of 9.20 from holding Class 1 Nickel or generate 104.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Class 1 Nickel vs. IGO Limited
Performance |
| Timeline |
| Class 1 Nickel |
| IGO Limited |
Class 1 and IGO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Class 1 and IGO
The main advantage of trading using opposite Class 1 and IGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Class 1 position performs unexpectedly, IGO 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 IGO will offset losses from the drop in IGO's long position.| Class 1 vs. Qubec Nickel Corp | Class 1 vs. IGO Limited | Class 1 vs. Avarone Metals | Class 1 vs. Elcora Advanced Materials |
| IGO vs. Qubec Nickel Corp | IGO vs. Nickel Mines Limited | IGO vs. Mineral Resources Limited | IGO vs. Surge Copper 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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