Correlation Between South32 and IGO

Can any of the company-specific risk be diversified away by investing in both South32 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 South32 and IGO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between South32 Limited and IGO Limited, you can compare the effects of market volatilities on South32 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 South32 with a short position of IGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and IGO.

Diversification Opportunities for South32 and IGO

0.41

Correlation Coefficient

South32  IGO

Very weak diversification

The 3 months correlation between South32 and IGO is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding South32 Limited and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited and South32 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 South32 Limited 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 South32 i.e., South32 and IGO go up and down completely randomly.

Pair Corralation between South32 and IGO

Assuming the 90 days horizon South32 is expected to generate 1.51 times less return on investment than IGO. But when comparing it to its historical volatility, South32 Limited is 1.21 times less risky than IGO. It trades about 0.09 of its potential returns per unit of risk. IGO Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  231.00  in IGO Limited on May 5, 2025 and sell it today you would earn a total of  69.00  from holding IGO Limited or generate 29.87% return on investment over 90 days.

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

South32 Limited  vs.  IGO Limited

South32 Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in South32 Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, South32 reported solid returns over the last few months and may actually be approaching a breakup point.

IGO Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IGO Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, IGO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with South32 and IGO

The main advantage of trading using opposite South32 and IGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 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 South32 Limited 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.