Correlation Between Ivanhoe Mines and African Rainbow

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

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

Diversification Opportunities for Ivanhoe Mines and African Rainbow

-0.22

Correlation Coefficient

Ivanhoe Mines  African Rainbow

Very good diversification

The 3 months correlation between Ivanhoe and African is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Mines and African Rainbow Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Rainbow Minerals 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 African Rainbow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Rainbow Minerals has no effect on the direction of Ivanhoe Mines i.e., Ivanhoe Mines and African Rainbow go up and down completely randomly.

Pair Corralation between Ivanhoe Mines and African Rainbow

If you would invest  1,311  in Ivanhoe Mines on September 14, 2024 and sell it today you would lose (14.00) from holding Ivanhoe Mines or give up 1.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Ivanhoe Mines  vs.  African Rainbow Minerals

Ivanhoe Mines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ivanhoe Mines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ivanhoe Mines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

African Rainbow Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days African Rainbow Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, African Rainbow is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ivanhoe Mines and African Rainbow

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

The idea behind Ivanhoe Mines and African Rainbow Minerals 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.