Correlation Between Erdene Resource and Ivanhoe Mines

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

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

Diversification Opportunities for Erdene Resource and Ivanhoe Mines

0.63

Correlation Coefficient

Erdene Resource  Ivanhoe Mines

Poor diversification

The 3 months correlation between Erdene and Ivanhoe is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Erdene Resource Development and Ivanhoe Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivanhoe Mines and Erdene Resource 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 Erdene Resource Development are associated (or correlated) with Ivanhoe Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivanhoe Mines has no effect on the direction of Erdene Resource i.e., Erdene Resource and Ivanhoe Mines go up and down completely randomly.

Pair Corralation between Erdene Resource and Ivanhoe Mines

Assuming the 90 days trading horizon Erdene Resource Development is expected to under-perform the Ivanhoe Mines. In addition to that, Erdene Resource is 1.1 times more volatile than Ivanhoe Mines. It trades about -0.06 of its total potential returns per unit of risk. Ivanhoe Mines is currently generating about 0.59 per unit of volatility. If you would invest  1,580  in Ivanhoe Mines on January 24, 2024 and sell it today you would earn a total of  323.00  from holding Ivanhoe Mines or generate 20.44% return on investment over 90 days.

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

Erdene Resource Development  vs.  Ivanhoe Mines

Erdene Resource Deve

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Erdene Resource Development are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Erdene Resource displayed solid returns over the last few months and may actually be approaching a breakup point.

Ivanhoe Mines

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ivanhoe Mines are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Ivanhoe Mines displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erdene Resource and Ivanhoe Mines

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

The idea behind Erdene Resource Development and Ivanhoe Mines 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.