Correlation Between IGO and StrikePoint Gold

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

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

Diversification Opportunities for IGO and StrikePoint Gold

0.44

Correlation Coefficient

IGO  StrikePoint Gold

Very weak diversification

The 3 months correlation between IGO and StrikePoint is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and StrikePoint Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StrikePoint Gold 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 StrikePoint Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StrikePoint Gold has no effect on the direction of IGO i.e., IGO and StrikePoint Gold go up and down completely randomly.

Pair Corralation between IGO and StrikePoint Gold

Assuming the 90 days horizon IGO Limited is expected to under-perform the StrikePoint Gold. But the pink sheet apears to be less risky and, when comparing its historical volatility, IGO Limited is 6.56 times less risky than StrikePoint Gold. The pink sheet trades about -0.03 of its potential returns per unit of risk. The StrikePoint Gold is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  18.00  in StrikePoint Gold on October 21, 2024 and sell it today you would lose (4.00) from holding StrikePoint Gold or give up 22.22% of portfolio value over 90 days.

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

IGO Limited  vs.  StrikePoint Gold

IGO Limited

Risk-Adjusted Performance

0 of 100

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 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.

StrikePoint Gold

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in StrikePoint Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, StrikePoint Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IGO and StrikePoint Gold

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

The idea behind IGO Limited and StrikePoint Gold 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.