Correlation Between Ivanhoe Mines and Erdene Resource

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

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

Diversification Opportunities for Ivanhoe Mines and Erdene Resource

0.62

Correlation Coefficient

Ivanhoe Mines  Erdene Resource

Poor diversification

The 3 months correlation between Ivanhoe and Erdene is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Mines and Erdene Resource Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erdene Resource Deve and Ivanhoe Mines 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 Mines are associated (or correlated) with Erdene Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erdene Resource Deve has no effect on the direction of Ivanhoe Mines i.e., Ivanhoe Mines and Erdene Resource go up and down completely randomly.

Pair Corralation between Ivanhoe Mines and Erdene Resource

Assuming the 90 days trading horizon Ivanhoe Mines is expected to generate 0.79 times more return on investment than Erdene Resource. However, Ivanhoe Mines is 1.27 times less risky than Erdene Resource. It trades about 0.06 of its potential returns per unit of risk. Erdene Resource Development is currently generating about 0.02 per unit of risk. If you would invest  974.00  in Ivanhoe Mines on January 26, 2024 and sell it today you would earn a total of  859.00  from holding Ivanhoe Mines or generate 88.19% return on investment over 90 days.

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

Ivanhoe Mines  vs.  Erdene Resource Development

Ivanhoe Mines

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ivanhoe Mines are ranked lower than 17 (%) 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.

Erdene Resource Deve

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Erdene Resource Development are ranked lower than 12 (%) 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.

Pair Trading with Ivanhoe Mines and Erdene Resource

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

The idea behind Ivanhoe Mines and Erdene Resource Development 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.