Correlation Between Adriatic Metals and IGO

Can any of the company-specific risk be diversified away by investing in both Adriatic Metals 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 Adriatic Metals and IGO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adriatic Metals PLC and IGO Limited, you can compare the effects of market volatilities on Adriatic Metals 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 Adriatic Metals with a short position of IGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adriatic Metals and IGO.

Diversification Opportunities for Adriatic Metals and IGO

-0.32

Correlation Coefficient

Adriatic Metals  IGO

Very good diversification

The 3 months correlation between Adriatic and IGO is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals PLC and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited and Adriatic Metals 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 Adriatic Metals PLC 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 Adriatic Metals i.e., Adriatic Metals and IGO go up and down completely randomly.

Pair Corralation between Adriatic Metals and IGO

Assuming the 90 days horizon Adriatic Metals PLC is expected to generate 1.46 times more return on investment than IGO. However, Adriatic Metals is 1.46 times more volatile than IGO Limited. It trades about 0.13 of its potential returns per unit of risk. IGO Limited is currently generating about -0.08 per unit of risk. If you would invest  200.00  in Adriatic Metals PLC on September 5, 2024 and sell it today you would earn a total of  63.00  from holding Adriatic Metals PLC or generate 31.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Adriatic Metals PLC  vs.  IGO Limited

Adriatic Metals PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Adriatic Metals reported solid returns over the last few months and may actually be approaching a breakup point.

IGO Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IGO Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Adriatic Metals and IGO

The main advantage of trading using opposite Adriatic Metals and IGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adriatic Metals 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.

The idea behind Adriatic Metals PLC and IGO Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.