Correlation Between IGO and Decade Resources

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

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

Diversification Opportunities for IGO and Decade Resources

0.03

Correlation Coefficient

IGO  Decade Resources

Significant diversification

The 3 months correlation between IGO and Decade is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding IGO Limited and Decade Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decade Resources and IGO 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 IGO Limited are associated (or correlated) with Decade Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decade Resources has no effect on the direction of IGO i.e., IGO and Decade Resources go up and down completely randomly.

Pair Corralation between IGO and Decade Resources

Assuming the 90 days horizon IGO Limited is expected to generate 0.18 times more return on investment than Decade Resources. However, IGO Limited is 5.51 times less risky than Decade Resources. It trades about 0.17 of its potential returns per unit of risk. Decade Resources is currently generating about -0.22 per unit of risk. If you would invest  489.00  in IGO Limited on February 26, 2024 and sell it today you would earn a total of  21.00  from holding IGO Limited or generate 4.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

IGO Limited  vs.  Decade Resources

IGO Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IGO Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, IGO may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Decade Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Decade Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with IGO and Decade Resources

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

The idea behind IGO Limited and Decade Resources 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.