Correlation Between IGO and Nickel Mines

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

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

Diversification Opportunities for IGO and Nickel Mines

0.62

Correlation Coefficient

IGO  Nickel Mines

Poor diversification

The 3 months correlation between IGO and Nickel is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Nickel Mines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nickel Mines Limited 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 Nickel Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nickel Mines Limited has no effect on the direction of IGO i.e., IGO and Nickel Mines go up and down completely randomly.

Pair Corralation between IGO and Nickel Mines

Assuming the 90 days horizon IGO Limited is expected to under-perform the Nickel Mines. But the pink sheet apears to be less risky and, when comparing its historical volatility, IGO Limited is 2.21 times less risky than Nickel Mines. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Nickel Mines Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Nickel Mines Limited on December 28, 2024 and sell it today you would lose (9.00) from holding Nickel Mines Limited or give up 18.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

IGO Limited  vs.  Nickel Mines Limited

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.

Nickel Mines Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nickel Mines Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with IGO and Nickel Mines

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

The idea behind IGO Limited and Nickel Mines 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.