Correlation Between Eastern Platinum and Ivanhoe Energy

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

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

Diversification Opportunities for Eastern Platinum and Ivanhoe Energy

-0.35

Correlation Coefficient

Eastern Platinum  Ivanhoe Energy

Very good diversification

The 3 months correlation between Eastern and Ivanhoe is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Platinum Limited and Ivanhoe Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivanhoe Energy and Eastern Platinum 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 Eastern Platinum Limited are associated (or correlated) with Ivanhoe Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivanhoe Energy has no effect on the direction of Eastern Platinum i.e., Eastern Platinum and Ivanhoe Energy go up and down completely randomly.

Pair Corralation between Eastern Platinum and Ivanhoe Energy

Assuming the 90 days trading horizon Eastern Platinum Limited is expected to generate 1.68 times more return on investment than Ivanhoe Energy. However, Eastern Platinum is 1.68 times more volatile than Ivanhoe Energy. It trades about 0.0 of its potential returns per unit of risk. Ivanhoe Energy is currently generating about -0.17 per unit of risk. If you would invest  18.00  in Eastern Platinum Limited on November 29, 2024 and sell it today you would lose (2.00) from holding Eastern Platinum Limited or give up 11.11% of portfolio value over 90 days.

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

Eastern Platinum Limited  vs.  Ivanhoe Energy

Eastern Platinum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastern Platinum Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Eastern Platinum is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Ivanhoe Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ivanhoe Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Eastern Platinum and Ivanhoe Energy

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

The idea behind Eastern Platinum Limited and Ivanhoe Energy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.