Correlation Between IperionX Limited and Nexa Resources

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

By analyzing existing cross correlation between IperionX Limited American and Nexa Resources SA, you can compare the effects of market volatilities on IperionX Limited and Nexa Resources 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 IperionX Limited with a short position of Nexa Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of IperionX Limited and Nexa Resources.

Diversification Opportunities for IperionX Limited and Nexa Resources

0.7

Correlation Coefficient

IperionX Limited  Nexa Resources

Poor diversification

The 3 months correlation between IperionX and Nexa is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding IperionX Limited American and Nexa Resources SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexa Resources SA and IperionX Limited 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 IperionX Limited American are associated (or correlated) with Nexa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexa Resources SA has no effect on the direction of IperionX Limited i.e., IperionX Limited and Nexa Resources go up and down completely randomly.

Pair Corralation between IperionX Limited and Nexa Resources

Considering the 90-day investment horizon IperionX Limited American is expected to under-perform the Nexa Resources. But the stock apears to be less risky and, when comparing its historical volatility, IperionX Limited American is 1.09 times less risky than Nexa Resources. The stock trades about -0.26 of its potential returns per unit of risk. The Nexa Resources SA is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  898.00  in Nexa Resources SA on December 28, 2024 and sell it today you would lose (289.00) from holding Nexa Resources SA or give up 32.18% of portfolio value over 90 days.

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

IperionX Limited American  vs.  Nexa Resources SA

IperionX Limited American

Risk-Adjusted Performance

Very Weak

Over the last 90 days IperionX Limited American has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic 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.

Nexa Resources SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nexa Resources SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat 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.

Pair Trading with IperionX Limited and Nexa Resources

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

The idea behind IperionX Limited American and Nexa Resources SA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.