Correlation Between Grid Metals and IGO

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

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

Diversification Opportunities for Grid Metals and IGO

0.31

Correlation Coefficient

Grid Metals  IGO

Weak diversification

The 3 months correlation between Grid and IGO is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Grid Metals Corp and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited and Grid Metals 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 Grid Metals Corp 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 Grid Metals i.e., Grid Metals and IGO go up and down completely randomly.

Pair Corralation between Grid Metals and IGO

Assuming the 90 days horizon Grid Metals Corp is expected to generate 3.19 times more return on investment than IGO. However, Grid Metals is 3.19 times more volatile than IGO Limited. It trades about 0.06 of its potential returns per unit of risk. IGO Limited is currently generating about -0.03 per unit of risk. If you would invest  2.76  in Grid Metals Corp on November 29, 2024 and sell it today you would earn a total of  0.04  from holding Grid Metals Corp or generate 1.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Grid Metals Corp  vs.  IGO Limited

Grid Metals Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grid Metals Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Grid Metals reported solid returns over the last few months and may actually be approaching a breakup point.

IGO Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days IGO Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Grid Metals and IGO

The main advantage of trading using opposite Grid Metals and IGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grid Metals 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.

The idea behind Grid Metals Corp and IGO Limited 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..