Correlation Between Grid Metals and Iluka Resources

Can any of the company-specific risk be diversified away by investing in both Grid Metals and Iluka 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 Grid Metals and Iluka Resources 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 Iluka Resources Ltd, you can compare the effects of market volatilities on Grid Metals and Iluka 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 Grid Metals with a short position of Iluka Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grid Metals and Iluka Resources.

Diversification Opportunities for Grid Metals and Iluka Resources

0.02

Correlation Coefficient

Grid Metals  Iluka Resources

Significant diversification

The 3 months correlation between Grid and Iluka is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Grid Metals Corp and Iluka Resources Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iluka Resources 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 Iluka Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iluka Resources has no effect on the direction of Grid Metals i.e., Grid Metals and Iluka Resources go up and down completely randomly.

Pair Corralation between Grid Metals and Iluka Resources

Assuming the 90 days horizon Grid Metals Corp is expected to generate 3.14 times more return on investment than Iluka Resources. However, Grid Metals is 3.14 times more volatile than Iluka Resources Ltd. It trades about 0.09 of its potential returns per unit of risk. Iluka Resources Ltd is currently generating about -0.14 per unit of risk. If you would invest  2.13  in Grid Metals Corp on December 1, 2024 and sell it today you would earn a total of  0.67  from holding Grid Metals Corp or generate 31.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Grid Metals Corp  vs.  Iluka Resources Ltd

Grid Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grid Metals Corp are ranked lower than 7 (%) 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.

Iluka Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iluka Resources Ltd 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.

Pair Trading with Grid Metals and Iluka Resources

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

The idea behind Grid Metals Corp and Iluka Resources Ltd 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..