Correlation Between Lake Resources and IGO
Can any of the company-specific risk be diversified away by investing in both Lake Resources and IGO 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 Lake Resources and IGO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lake Resources NL and IGO Limited, you can compare the effects of market volatilities on Lake Resources and IGO 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 Lake Resources with a short position of IGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Resources and IGO.
Diversification Opportunities for Lake Resources and IGO
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Lake and IGO is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lake Resources NL and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited and Lake Resources 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 Lake Resources NL are associated (or correlated) with IGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGO Limited has no effect on the direction of Lake Resources i.e., Lake Resources and IGO go up and down completely randomly.
Pair Corralation between Lake Resources and IGO
Assuming the 90 days horizon Lake Resources NL is expected to under-perform the IGO. In addition to that, Lake Resources is 3.12 times more volatile than IGO Limited. It trades about -0.19 of its total potential returns per unit of risk. IGO Limited is currently generating about -0.2 per unit of volatility. If you would invest 350.00 in IGO Limited on September 23, 2024 and sell it today you would lose (69.00) from holding IGO Limited or give up 19.71% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Lake Resources NL vs. IGO Limited
Performance |
Timeline |
Lake Resources NL |
IGO Limited |
Lake Resources and IGO Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lake Resources and IGO
The main advantage of trading using opposite Lake Resources and IGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Resources position performs unexpectedly, IGO 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 IGO will offset losses from the drop in IGO's long position.Lake Resources vs. Stepan Company | Lake Resources vs. Eldorado Gold Corp | Lake Resources vs. Apogee Enterprises | Lake Resources vs. Precision Drilling |
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Check out your portfolio center.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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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