Correlation Between IGO and Starr Peak

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

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

Diversification Opportunities for IGO and Starr Peak

-0.43

Correlation Coefficient

IGO  Starr Peak

Very good diversification

The 3 months correlation between IGO and Starr is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Starr Peak Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starr Peak Exploration 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 Starr Peak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starr Peak Exploration has no effect on the direction of IGO i.e., IGO and Starr Peak go up and down completely randomly.

Pair Corralation between IGO and Starr Peak

Assuming the 90 days horizon IGO Limited is expected to under-perform the Starr Peak. But the pink sheet apears to be less risky and, when comparing its historical volatility, IGO Limited is 17.42 times less risky than Starr Peak. The pink sheet trades about -0.21 of its potential returns per unit of risk. The Starr Peak Exploration is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Starr Peak Exploration on September 5, 2024 and sell it today you would earn a total of  5.00  from holding Starr Peak Exploration or generate 20.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

IGO Limited  vs.  Starr Peak Exploration

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 showed solid returns over the last few months and may actually be approaching a breakup point.

Starr Peak Exploration

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Starr Peak Exploration are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Starr Peak may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IGO and Starr Peak

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

The idea behind IGO Limited and Starr Peak Exploration 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.