Correlation Between IGO and Canstar Resources

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

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

Diversification Opportunities for IGO and Canstar Resources

-0.41

Correlation Coefficient

IGO  Canstar Resources

Very good diversification

The 3 months correlation between IGO and Canstar is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Canstar Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canstar Resources 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 Canstar Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canstar Resources has no effect on the direction of IGO i.e., IGO and Canstar Resources go up and down completely randomly.

Pair Corralation between IGO and Canstar Resources

Assuming the 90 days horizon IGO Limited is expected to generate 0.28 times more return on investment than Canstar Resources. However, IGO Limited is 3.56 times less risky than Canstar Resources. It trades about 0.11 of its potential returns per unit of risk. Canstar Resources is currently generating about -0.06 per unit of risk. If you would invest  636.00  in IGO Limited on September 4, 2024 and sell it today you would earn a total of  116.00  from holding IGO Limited or generate 18.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

IGO Limited  vs.  Canstar Resources

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.

Canstar Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canstar Resources 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with IGO and Canstar Resources

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

The idea behind IGO Limited and Canstar Resources 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.