Correlation Between IGO and Lithium Ionic

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

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

Diversification Opportunities for IGO and Lithium Ionic

-0.12

Correlation Coefficient

IGO  Lithium Ionic

Good diversification

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

Pair Corralation between IGO and Lithium Ionic

Assuming the 90 days horizon IGO Limited is expected to generate 0.61 times more return on investment than Lithium Ionic. However, IGO Limited is 1.64 times less risky than Lithium Ionic. It trades about -0.04 of its potential returns per unit of risk. Lithium Ionic Corp is currently generating about -0.03 per unit of risk. If you would invest  1,125  in IGO Limited on September 15, 2024 and sell it today you would lose (445.00) from holding IGO Limited or give up 39.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

IGO Limited  vs.  Lithium Ionic Corp

IGO Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IGO Limited are ranked lower than 8 (%) 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.

Lithium Ionic Corp

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with IGO and Lithium Ionic

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

The idea behind IGO Limited and Lithium Ionic Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.