Correlation Between Allkem and IGO

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

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

Diversification Opportunities for Allkem and IGO

0.71

Correlation Coefficient

Allkem  IGO

Poor diversification

The 3 months correlation between Allkem and IGO is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Allkem and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited and Allkem 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 Allkem 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 Allkem i.e., Allkem and IGO go up and down completely randomly.

Pair Corralation between Allkem and IGO

If you would invest  659.00  in IGO Limited on September 2, 2024 and sell it today you would earn a total of  21.00  from holding IGO Limited or generate 3.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.54%
Values	Daily Returns

Allkem  vs.  IGO Limited

Allkem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allkem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Allkem is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

IGO Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IGO Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, IGO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Allkem and IGO

The main advantage of trading using opposite Allkem and IGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allkem 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 Allkem 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.