Correlation Between Ivanhoe Energy and Volcanic Gold
Can any of the company-specific risk be diversified away by investing in both Ivanhoe Energy and Volcanic Gold 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 Ivanhoe Energy and Volcanic Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ivanhoe Energy and Volcanic Gold Mines, you can compare the effects of market volatilities on Ivanhoe Energy and Volcanic Gold 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 Ivanhoe Energy with a short position of Volcanic Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ivanhoe Energy and Volcanic Gold.
Diversification Opportunities for Ivanhoe Energy and Volcanic Gold
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ivanhoe and Volcanic is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Energy and Volcanic Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volcanic Gold Mines and Ivanhoe Energy 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 Ivanhoe Energy are associated (or correlated) with Volcanic Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volcanic Gold Mines has no effect on the direction of Ivanhoe Energy i.e., Ivanhoe Energy and Volcanic Gold go up and down completely randomly.
Pair Corralation between Ivanhoe Energy and Volcanic Gold
Assuming the 90 days horizon Ivanhoe Energy is expected to generate 0.4 times more return on investment than Volcanic Gold. However, Ivanhoe Energy is 2.52 times less risky than Volcanic Gold. It trades about -0.08 of its potential returns per unit of risk. Volcanic Gold Mines is currently generating about -0.17 per unit of risk. If you would invest 1,630 in Ivanhoe Energy on March 20, 2024 and sell it today you would lose (166.00) from holding Ivanhoe Energy or give up 10.18% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 80.95% |
Values | Daily Returns |
Ivanhoe Energy vs. Volcanic Gold Mines
Performance |
Timeline |
Ivanhoe Energy |
Volcanic Gold Mines |
Ivanhoe Energy and Volcanic Gold Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ivanhoe Energy and Volcanic Gold
The main advantage of trading using opposite Ivanhoe Energy and Volcanic Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ivanhoe Energy position performs unexpectedly, Volcanic Gold 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 Volcanic Gold will offset losses from the drop in Volcanic Gold's long position.The idea behind Ivanhoe Energy and Volcanic Gold 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.Check out your portfolio center.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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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