Correlation Between IGO and Critical Elements

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

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

Diversification Opportunities for IGO and Critical Elements

0.4

Correlation Coefficient

IGO  Critical Elements

Very weak diversification

The 3 months correlation between IGO and Critical is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Critical Elements in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Critical Elements 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 Critical Elements. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Critical Elements has no effect on the direction of IGO i.e., IGO and Critical Elements go up and down completely randomly.

Pair Corralation between IGO and Critical Elements

Assuming the 90 days horizon IGO Limited is expected to under-perform the Critical Elements. But the pink sheet apears to be less risky and, when comparing its historical volatility, IGO Limited is 1.93 times less risky than Critical Elements. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Critical Elements is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Critical Elements on September 2, 2024 and sell it today you would earn a total of  1.00  from holding Critical Elements or generate 3.57% return on investment over 90 days.

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

IGO Limited  vs.  Critical Elements

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. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Critical Elements

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Critical Elements are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Critical Elements may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IGO and Critical Elements

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

The idea behind IGO Limited and Critical Elements 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.