Correlation Between IGO and Edison Cobalt
Can any of the company-specific risk be diversified away by investing in both IGO and Edison Cobalt 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 Edison Cobalt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGO Limited and Edison Cobalt Corp, you can compare the effects of market volatilities on IGO and Edison Cobalt 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 Edison Cobalt. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGO and Edison Cobalt.
Diversification Opportunities for IGO and Edison Cobalt
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between IGO and Edison is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Edison Cobalt Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison Cobalt Corp 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 Edison Cobalt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edison Cobalt Corp has no effect on the direction of IGO i.e., IGO and Edison Cobalt go up and down completely randomly.
Pair Corralation between IGO and Edison Cobalt
Assuming the 90 days horizon IGO is expected to generate 2.16 times less return on investment than Edison Cobalt. But when comparing it to its historical volatility, IGO Limited is 6.92 times less risky than Edison Cobalt. It trades about 0.14 of its potential returns per unit of risk. Edison Cobalt Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8.11 in Edison Cobalt Corp on September 8, 2024 and sell it today you would lose (1.11) from holding Edison Cobalt Corp or give up 13.69% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
IGO Limited vs. Edison Cobalt Corp
Performance |
Timeline |
IGO Limited |
Edison Cobalt Corp |
IGO and Edison Cobalt Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IGO and Edison Cobalt
The main advantage of trading using opposite IGO and Edison Cobalt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGO position performs unexpectedly, Edison Cobalt 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 Edison Cobalt will offset losses from the drop in Edison Cobalt's long position.IGO vs. Avarone Metals | IGO vs. Morningstar Unconstrained Allocation | IGO vs. Knife River | IGO vs. Saat Servative Strategy |
Edison Cobalt vs. Avarone Metals | Edison Cobalt vs. Morningstar Unconstrained Allocation | Edison Cobalt vs. Knife River | Edison Cobalt vs. Saat Servative Strategy |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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