Correlation Between Ivanhoe Mines and Falcon Energy

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

By analyzing existing cross correlation between Ivanhoe Mines and Falcon Energy Materials, you can compare the effects of market volatilities on Ivanhoe Mines and Falcon Energy 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 Falcon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ivanhoe Mines and Falcon Energy.

Diversification Opportunities for Ivanhoe Mines and Falcon Energy

-0.05

Correlation Coefficient

Ivanhoe Mines  Falcon Energy

Good diversification

The 3 months correlation between Ivanhoe and Falcon is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Mines and Falcon Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Energy Materials 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 Falcon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Energy Materials has no effect on the direction of Ivanhoe Mines i.e., Ivanhoe Mines and Falcon Energy go up and down completely randomly.

Pair Corralation between Ivanhoe Mines and Falcon Energy

Assuming the 90 days trading horizon Ivanhoe Mines is expected to generate 0.66 times more return on investment than Falcon Energy. However, Ivanhoe Mines is 1.5 times less risky than Falcon Energy. It trades about 0.07 of its potential returns per unit of risk. Falcon Energy Materials is currently generating about 0.03 per unit of risk. If you would invest  1,739  in Ivanhoe Mines on September 12, 2024 and sell it today you would earn a total of  194.00  from holding Ivanhoe Mines or generate 11.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Ivanhoe Mines  vs.  Falcon Energy Materials

Ivanhoe Mines

Risk-Adjusted Performance

5 of 100

Modest

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

Falcon Energy Materials

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Energy Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Falcon Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ivanhoe Mines and Falcon Energy

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

The idea behind Ivanhoe Mines and Falcon Energy Materials 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.