Correlation Between Ivanhoe Energy and Loncor Resources

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

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

Diversification Opportunities for Ivanhoe Energy and Loncor Resources

0.71

Correlation Coefficient

Ivanhoe Energy  Loncor Resources

Poor diversification

The 3 months correlation between Ivanhoe and Loncor is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Energy and Loncor Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loncor Resources 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 Loncor Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loncor Resources has no effect on the direction of Ivanhoe Energy i.e., Ivanhoe Energy and Loncor Resources go up and down completely randomly.

Pair Corralation between Ivanhoe Energy and Loncor Resources

Assuming the 90 days horizon Ivanhoe Energy is expected to generate 1.4 times less return on investment than Loncor Resources. In addition to that, Ivanhoe Energy is 1.3 times more volatile than Loncor Resources. It trades about 0.08 of its total potential returns per unit of risk. Loncor Resources is currently generating about 0.14 per unit of volatility. If you would invest  39.00  in Loncor Resources on September 13, 2024 and sell it today you would earn a total of  10.00  from holding Loncor Resources or generate 25.64% return on investment over 90 days.

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

Ivanhoe Energy  vs.  Loncor Resources

Ivanhoe Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ivanhoe Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ivanhoe Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Loncor Resources

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Loncor Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Loncor Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ivanhoe Energy and Loncor Resources

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

The idea behind Ivanhoe Energy and Loncor 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.