Correlation Between Bushveld Minerals and IGO

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

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

Diversification Opportunities for Bushveld Minerals and IGO

-0.01

Correlation Coefficient

Bushveld Minerals  IGO

Good diversification

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

Pair Corralation between Bushveld Minerals and IGO

Assuming the 90 days horizon Bushveld Minerals Limited is expected to generate 93.87 times more return on investment than IGO. However, Bushveld Minerals is 93.87 times more volatile than IGO Limited. It trades about 0.22 of its potential returns per unit of risk. IGO Limited is currently generating about 0.03 per unit of risk. If you would invest  0.80  in Bushveld Minerals Limited on September 3, 2024 and sell it today you would earn a total of  0.20  from holding Bushveld Minerals Limited or generate 25.0% return on investment over 90 days.

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

Bushveld Minerals Limited  vs.  IGO Limited

Bushveld Minerals

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bushveld Minerals Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bushveld Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Bushveld Minerals and IGO

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

The idea behind Bushveld Minerals Limited and IGO 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.