Correlation Between Ioneer and IXE Select

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

By analyzing existing cross correlation between ioneer Ltd American and IXE Select Sector, you can compare the effects of market volatilities on Ioneer and IXE Select 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 Ioneer with a short position of IXE Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ioneer and IXE Select.

Diversification Opportunities for Ioneer and IXE Select

0.26

Correlation Coefficient

Ioneer  IXE Select

Modest diversification

The 3 months correlation between Ioneer and IXE is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding ioneer Ltd American and IXE Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IXE Select Sector and Ioneer 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 ioneer Ltd American are associated (or correlated) with IXE Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IXE Select Sector has no effect on the direction of Ioneer i.e., Ioneer and IXE Select go up and down completely randomly.

Pair Corralation between Ioneer and IXE Select

Given the investment horizon of 90 days ioneer Ltd American is expected to under-perform the IXE Select. In addition to that, Ioneer is 3.66 times more volatile than IXE Select Sector. It trades about -0.01 of its total potential returns per unit of risk. IXE Select Sector is currently generating about 0.02 per unit of volatility. If you would invest  92,682  in IXE Select Sector on October 23, 2024 and sell it today you would earn a total of  6,336  from holding IXE Select Sector or generate 6.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ioneer Ltd American  vs.  IXE Select Sector

Pair Trading with Ioneer and IXE Select

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

The idea behind ioneer Ltd American and IXE Select Sector 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.