Correlation Between IGO and Glencore PLC

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

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

Diversification Opportunities for IGO and Glencore PLC

-0.28

Correlation Coefficient

IGO  Glencore PLC

Very good diversification

The 3 months correlation between IGO and Glencore is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Glencore PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore PLC 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 Glencore PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore PLC has no effect on the direction of IGO i.e., IGO and Glencore PLC go up and down completely randomly.

Pair Corralation between IGO and Glencore PLC

Assuming the 90 days horizon IGO Limited is expected to generate 1.16 times more return on investment than Glencore PLC. However, IGO is 1.16 times more volatile than Glencore PLC. It trades about 0.03 of its potential returns per unit of risk. Glencore PLC is currently generating about -0.01 per unit of risk. If you would invest  659.00  in IGO Limited on September 2, 2024 and sell it today you would earn a total of  21.00  from holding IGO Limited or generate 3.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

IGO Limited  vs.  Glencore PLC

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.

Glencore PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glencore PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Glencore PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IGO and Glencore PLC

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

The idea behind IGO Limited and Glencore PLC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.