Correlation Between IGO and Boliden AB

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

By analyzing existing cross correlation between IGO Limited and Boliden AB ADR, you can compare the effects of market volatilities on IGO and Boliden AB 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 Boliden AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and Boliden AB.

Diversification Opportunities for IGO and Boliden AB

-0.12

Correlation Coefficient

IGO  Boliden AB

Good diversification

The 3 months correlation between IGO and Boliden is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Boliden AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boliden AB ADR 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 Boliden AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boliden AB ADR has no effect on the direction of IGO i.e., IGO and Boliden AB go up and down completely randomly.

Pair Corralation between IGO and Boliden AB

Assuming the 90 days horizon IGO is expected to generate 1.19 times less return on investment than Boliden AB. But when comparing it to its historical volatility, IGO Limited is 1.02 times less risky than Boliden AB. It trades about 0.06 of its potential returns per unit of risk. Boliden AB ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,696  in Boliden AB ADR on September 5, 2024 and sell it today you would earn a total of  484.00  from holding Boliden AB ADR or generate 8.5% return on investment over 90 days.

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

IGO Limited  vs.  Boliden AB ADR

IGO Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IGO Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, IGO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Boliden AB ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Boliden AB ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Boliden AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IGO and Boliden AB

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

The idea behind IGO Limited and Boliden AB ADR 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.