Correlation Between Ivanhoe Energy and First Mining

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

By analyzing existing cross correlation between Ivanhoe Energy and First Mining Gold, you can compare the effects of market volatilities on Ivanhoe Energy and First Mining 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 First Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ivanhoe Energy and First Mining.

Diversification Opportunities for Ivanhoe Energy and First Mining

-0.33

Correlation Coefficient

Ivanhoe Energy  First Mining

Very good diversification

The 3 months correlation between Ivanhoe and First is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Energy and First Mining Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Mining Gold 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 First Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Mining Gold has no effect on the direction of Ivanhoe Energy i.e., Ivanhoe Energy and First Mining go up and down completely randomly.

Pair Corralation between Ivanhoe Energy and First Mining

Assuming the 90 days horizon Ivanhoe Energy is expected to under-perform the First Mining. But the stock apears to be less risky and, when comparing its historical volatility, Ivanhoe Energy is 4.8 times less risky than First Mining. The stock trades about -0.29 of its potential returns per unit of risk. The First Mining Gold is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  6.73  in First Mining Gold on September 23, 2024 and sell it today you would earn a total of  6.27  from holding First Mining Gold or generate 93.16% return on investment over 90 days.

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

Ivanhoe Energy  vs.  First Mining Gold

Ivanhoe Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ivanhoe Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ivanhoe Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Mining Gold

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Mining Gold are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, First Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ivanhoe Energy and First Mining

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

The idea behind Ivanhoe Energy and First Mining Gold 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.