Correlation Between South32 and IGO
Can any of the company-specific risk be diversified away by investing in both South32 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 South32 and IGO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South32 Limited and IGO Limited, you can compare the effects of market volatilities on South32 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 South32 with a short position of IGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and IGO.
Diversification Opportunities for South32 and IGO
Good diversification
The 3 months correlation between South32 and IGO is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited and South32 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 South32 Limited 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 South32 i.e., South32 and IGO go up and down completely randomly.
Pair Corralation between South32 and IGO
Assuming the 90 days horizon South32 Limited is expected to under-perform the IGO. In addition to that, South32 is 1.6 times more volatile than IGO Limited. It trades about -0.1 of its total potential returns per unit of risk. IGO Limited is currently generating about -0.07 per unit of volatility. If you would invest 348.00 in IGO Limited on August 30, 2024 and sell it today you would lose (8.00) from holding IGO Limited or give up 2.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
South32 Limited vs. IGO Limited
Performance |
| Timeline |
| South32 Limited |
| IGO Limited |
South32 and IGO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South32 and IGO
The main advantage of trading using opposite South32 and IGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 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.| South32 vs. Rockridge Resources | South32 vs. Ameriwest Lithium | South32 vs. Osisko Metals Incorporated | South32 vs. Volt Lithium Corp |
| IGO vs. Grid Metals Corp | IGO vs. First American Silver | IGO vs. Qubec Nickel Corp | IGO vs. Lithium Australia NL |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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