Correlation Between IGO and Graphite One

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

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

Diversification Opportunities for IGO and Graphite One

0.01

Correlation Coefficient

IGO  Graphite One

Significant diversification

The 3 months correlation between IGO and Graphite is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Graphite One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphite One 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 Graphite One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphite One has no effect on the direction of IGO i.e., IGO and Graphite One go up and down completely randomly.

Pair Corralation between IGO and Graphite One

Assuming the 90 days horizon IGO Limited is expected to generate 0.15 times more return on investment than Graphite One. However, IGO Limited is 6.52 times less risky than Graphite One. It trades about -0.21 of its potential returns per unit of risk. Graphite One is currently generating about -0.04 per unit of risk. If you would invest  695.00  in IGO Limited on August 31, 2024 and sell it today you would lose (15.00) from holding IGO Limited or give up 2.16% of portfolio value over 90 days.

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

IGO Limited  vs.  Graphite One

IGO Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IGO Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, IGO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Graphite One

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graphite One are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Graphite One is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IGO and Graphite One

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

The idea behind IGO Limited and Graphite One 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.