Correlation Between Prime Mining and IGO

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

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

Diversification Opportunities for Prime Mining and IGO

0.18

Correlation Coefficient

Prime Mining  IGO

Average diversification

The 3 months correlation between Prime and IGO is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Prime Mining Corp and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited and Prime Mining 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 Prime Mining 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 Prime Mining i.e., Prime Mining and IGO go up and down completely randomly.

Pair Corralation between Prime Mining and IGO

Assuming the 90 days horizon Prime Mining Corp is expected to generate 1.74 times more return on investment than IGO. However, Prime Mining is 1.74 times more volatile than IGO Limited. It trades about 0.07 of its potential returns per unit of risk. IGO Limited is currently generating about -0.11 per unit of risk. If you would invest  100.00  in Prime Mining Corp on December 27, 2024 and sell it today you would earn a total of  12.00  from holding Prime Mining Corp or generate 12.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Prime Mining Corp  vs.  IGO Limited

Prime Mining Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Mining Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prime Mining 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Prime Mining and IGO

The main advantage of trading using opposite Prime Mining and IGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Mining 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 Prime Mining 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.