Correlation Between Asia Broadband and Ivanhoe Mines

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

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

Diversification Opportunities for Asia Broadband and Ivanhoe Mines

0.12

Correlation Coefficient

Asia Broadband  Ivanhoe Mines

Average diversification

The 3 months correlation between Asia and Ivanhoe is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Asia Broadband and Ivanhoe Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivanhoe Mines and Asia Broadband 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 Asia Broadband are associated (or correlated) with Ivanhoe Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivanhoe Mines has no effect on the direction of Asia Broadband i.e., Asia Broadband and Ivanhoe Mines go up and down completely randomly.

Pair Corralation between Asia Broadband and Ivanhoe Mines

Given the investment horizon of 90 days Asia Broadband is expected to generate 2.07 times more return on investment than Ivanhoe Mines. However, Asia Broadband is 2.07 times more volatile than Ivanhoe Mines. It trades about 0.02 of its potential returns per unit of risk. Ivanhoe Mines is currently generating about -0.11 per unit of risk. If you would invest  3.08  in Asia Broadband on October 21, 2024 and sell it today you would lose (0.08) from holding Asia Broadband or give up 2.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Asia Broadband  vs.  Ivanhoe Mines

Asia Broadband

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Broadband are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Asia Broadband may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Asia Broadband and Ivanhoe Mines

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

The idea behind Asia Broadband and Ivanhoe 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.