Correlation Between Gold Fields and Ivanhoe Electric

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

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

Diversification Opportunities for Gold Fields and Ivanhoe Electric

-0.67

Correlation Coefficient

Gold Fields  Ivanhoe Electric

Excellent diversification

The 3 months correlation between Gold and Ivanhoe is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Ivanhoe Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivanhoe Electric and Gold Fields 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 Gold Fields Ltd are associated (or correlated) with Ivanhoe Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivanhoe Electric has no effect on the direction of Gold Fields i.e., Gold Fields and Ivanhoe Electric go up and down completely randomly.

Pair Corralation between Gold Fields and Ivanhoe Electric

Considering the 90-day investment horizon Gold Fields Ltd is expected to generate 0.6 times more return on investment than Ivanhoe Electric. However, Gold Fields Ltd is 1.66 times less risky than Ivanhoe Electric. It trades about 0.34 of its potential returns per unit of risk. Ivanhoe Electric is currently generating about -0.04 per unit of risk. If you would invest  1,314  in Gold Fields Ltd on December 27, 2024 and sell it today you would earn a total of  781.50  from holding Gold Fields Ltd or generate 59.47% return on investment over 90 days.

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

Gold Fields Ltd  vs.  Ivanhoe Electric

Gold Fields

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gold Fields demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Ivanhoe Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ivanhoe Electric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Gold Fields and Ivanhoe Electric

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

The idea behind Gold Fields Ltd and Ivanhoe Electric 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.