Correlation Between Centaurus Metals and IGO

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

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

Diversification Opportunities for Centaurus Metals and IGO

0.49

Correlation Coefficient

Centaurus Metals  IGO

Very weak diversification

The 3 months correlation between Centaurus and IGO is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Centaurus Metals Limited and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited and Centaurus Metals 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 Centaurus Metals 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 Centaurus Metals i.e., Centaurus Metals and IGO go up and down completely randomly.

Pair Corralation between Centaurus Metals and IGO

Assuming the 90 days horizon Centaurus Metals Limited is expected to generate 1.89 times more return on investment than IGO. However, Centaurus Metals is 1.89 times more volatile than IGO Limited. It trades about -0.04 of its potential returns per unit of risk. IGO Limited is currently generating about -0.12 per unit of risk. If you would invest  28.00  in Centaurus Metals Limited on December 2, 2024 and sell it today you would lose (5.00) from holding Centaurus Metals Limited or give up 17.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.38%
Values	Daily Returns

Centaurus Metals Limited  vs.  IGO Limited

Centaurus Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centaurus Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

IGO Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days IGO Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Centaurus Metals and IGO

The main advantage of trading using opposite Centaurus Metals and IGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centaurus Metals 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 Centaurus Metals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.