Correlation Between Glencore PLC and Ivanhoe Mines

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

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

Diversification Opportunities for Glencore PLC and Ivanhoe Mines

0.77

Correlation Coefficient

Glencore PLC  Ivanhoe Mines

Poor diversification

The 3 months correlation between Glencore and Ivanhoe is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC ADR and Ivanhoe Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivanhoe Mines and Glencore PLC 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 Glencore PLC ADR 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 Glencore PLC i.e., Glencore PLC and Ivanhoe Mines go up and down completely randomly.

Pair Corralation between Glencore PLC and Ivanhoe Mines

Assuming the 90 days horizon Glencore PLC is expected to generate 5.04 times less return on investment than Ivanhoe Mines. But when comparing it to its historical volatility, Glencore PLC ADR is 1.36 times less risky than Ivanhoe Mines. It trades about 0.01 of its potential returns per unit of risk. Ivanhoe Mines is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,282  in Ivanhoe Mines on September 12, 2024 and sell it today you would earn a total of  81.00  from holding Ivanhoe Mines or generate 6.32% return on investment over 90 days.

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

Glencore PLC ADR  vs.  Ivanhoe Mines

Glencore PLC ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Glencore PLC ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Glencore PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ivanhoe Mines

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ivanhoe Mines are ranked lower than 3 (%) 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 Glencore PLC and Ivanhoe Mines

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