Correlation Between African Rainbow and Ivanhoe Mines

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

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

Diversification Opportunities for African Rainbow and Ivanhoe Mines

-0.27

Correlation Coefficient

African Rainbow  Ivanhoe Mines

Very good diversification

The 3 months correlation between African and Ivanhoe is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding African Rainbow Minerals and Ivanhoe Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivanhoe Mines and African Rainbow 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 African Rainbow Minerals 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 African Rainbow i.e., African Rainbow and Ivanhoe Mines go up and down completely randomly.

Pair Corralation between African Rainbow and Ivanhoe Mines

If you would invest  1,294  in Ivanhoe Mines on September 13, 2024 and sell it today you would earn a total of  56.00  from holding Ivanhoe Mines or generate 4.33% return on investment over 90 days.

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

African Rainbow Minerals  vs.  Ivanhoe Mines

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.

Ivanhoe Mines

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with African Rainbow and Ivanhoe Mines

The main advantage of trading using opposite African Rainbow and Ivanhoe Mines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Rainbow 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 African Rainbow Minerals 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.