Correlation Between IGO and Traction Uranium

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

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

Diversification Opportunities for IGO and Traction Uranium

-0.56

Correlation Coefficient

IGO  Traction Uranium

Excellent diversification

The 3 months correlation between IGO and Traction is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Traction Uranium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traction Uranium 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 Traction Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traction Uranium Corp has no effect on the direction of IGO i.e., IGO and Traction Uranium go up and down completely randomly.

Pair Corralation between IGO and Traction Uranium

Assuming the 90 days horizon IGO Limited is expected to under-perform the Traction Uranium. But the pink sheet apears to be less risky and, when comparing its historical volatility, IGO Limited is 35.98 times less risky than Traction Uranium. The pink sheet trades about -0.21 of its potential returns per unit of risk. The Traction Uranium Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Traction Uranium Corp on September 5, 2024 and sell it today you would lose (3.00) from holding Traction Uranium Corp or give up 12.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

IGO Limited  vs.  Traction Uranium Corp

IGO Limited

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IGO Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, IGO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Traction Uranium Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Traction Uranium Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Traction Uranium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IGO and Traction Uranium

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

The idea behind IGO Limited and Traction Uranium Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.