Correlation Between Ioneer and Bradda Head

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

By analyzing existing cross correlation between ioneer and Bradda Head Lithium, you can compare the effects of market volatilities on Ioneer and Bradda Head 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 Ioneer with a short position of Bradda Head. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ioneer and Bradda Head.

Diversification Opportunities for Ioneer and Bradda Head

0.41

Correlation Coefficient

Ioneer  Bradda Head

Very weak diversification

The 3 months correlation between Ioneer and Bradda is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding ioneer and Bradda Head Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bradda Head Lithium and Ioneer 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 ioneer are associated (or correlated) with Bradda Head. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bradda Head Lithium has no effect on the direction of Ioneer i.e., Ioneer and Bradda Head go up and down completely randomly.

Pair Corralation between Ioneer and Bradda Head

Assuming the 90 days horizon ioneer is expected to generate 1.94 times more return on investment than Bradda Head. However, Ioneer is 1.94 times more volatile than Bradda Head Lithium. It trades about 0.02 of its potential returns per unit of risk. Bradda Head Lithium is currently generating about -0.06 per unit of risk. If you would invest  27.00  in ioneer on September 13, 2024 and sell it today you would lose (16.00) from holding ioneer or give up 59.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ioneer  vs.  Bradda Head Lithium

ioneer

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ioneer are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Ioneer reported solid returns over the last few months and may actually be approaching a breakup point.

Bradda Head Lithium

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bradda Head Lithium are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Bradda Head may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ioneer and Bradda Head

The main advantage of trading using opposite Ioneer and Bradda Head positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ioneer position performs unexpectedly, Bradda Head 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 Bradda Head will offset losses from the drop in Bradda Head's long position.

The idea behind ioneer and Bradda Head Lithium 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.