Correlation Between IGO and Poseidon Nickel

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

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

Diversification Opportunities for IGO and Poseidon Nickel

0.17

Correlation Coefficient

IGO  Poseidon Nickel

Average diversification

The 3 months correlation between IGO and Poseidon is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Poseidon Nickel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Poseidon Nickel 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 Poseidon Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Poseidon Nickel has no effect on the direction of IGO i.e., IGO and Poseidon Nickel go up and down completely randomly.

Pair Corralation between IGO and Poseidon Nickel

Assuming the 90 days horizon IGO Limited is expected to under-perform the Poseidon Nickel. But the pink sheet apears to be less risky and, when comparing its historical volatility, IGO Limited is 20.43 times less risky than Poseidon Nickel. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Poseidon Nickel Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Poseidon Nickel Limited on September 12, 2024 and sell it today you would lose (2.10) from holding Poseidon Nickel Limited or give up 84.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.61%
Values	Daily Returns

IGO Limited  vs.  Poseidon Nickel Limited

IGO Limited

Risk-Adjusted Performance

8 of 100

Good

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.

Poseidon Nickel

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Poseidon Nickel Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Poseidon Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IGO and Poseidon Nickel

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

The idea behind IGO Limited and Poseidon Nickel 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.