Correlation Between Ivanhoe Energy and Aztec Minerals

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

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

Diversification Opportunities for Ivanhoe Energy and Aztec Minerals

0.82

Correlation Coefficient

Ivanhoe Energy  Aztec Minerals

Very poor diversification

The 3 months correlation between Ivanhoe and Aztec is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Energy and Aztec Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aztec Minerals Corp and Ivanhoe Energy 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 Ivanhoe Energy are associated (or correlated) with Aztec Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aztec Minerals Corp has no effect on the direction of Ivanhoe Energy i.e., Ivanhoe Energy and Aztec Minerals go up and down completely randomly.

Pair Corralation between Ivanhoe Energy and Aztec Minerals

Assuming the 90 days horizon Ivanhoe Energy is expected to under-perform the Aztec Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Ivanhoe Energy is 1.5 times less risky than Aztec Minerals. The stock trades about -0.25 of its potential returns per unit of risk. The Aztec Minerals Corp is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Aztec Minerals Corp on September 25, 2024 and sell it today you would lose (2.00) from holding Aztec Minerals Corp or give up 9.52% of portfolio value over 90 days.

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

Ivanhoe Energy  vs.  Aztec Minerals Corp

Ivanhoe Energy

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, Ivanhoe Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Aztec Minerals Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aztec Minerals Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Aztec Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ivanhoe Energy and Aztec Minerals

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

The idea behind Ivanhoe Energy and Aztec Minerals Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..