Correlation Between Ivanhoe Energy and Frontier Lithium

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

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

Diversification Opportunities for Ivanhoe Energy and Frontier Lithium

-0.38

Correlation Coefficient

Ivanhoe Energy  Frontier Lithium

Very good diversification

The 3 months correlation between Ivanhoe and Frontier is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Energy and Frontier Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Lithium 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 Frontier Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Lithium has no effect on the direction of Ivanhoe Energy i.e., Ivanhoe Energy and Frontier Lithium go up and down completely randomly.

Pair Corralation between Ivanhoe Energy and Frontier Lithium

Assuming the 90 days horizon Ivanhoe Energy is expected to under-perform the Frontier Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Ivanhoe Energy is 1.11 times less risky than Frontier Lithium. The stock trades about -0.06 of its potential returns per unit of risk. The Frontier Lithium is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  44.00  in Frontier Lithium on December 30, 2024 and sell it today you would earn a total of  15.00  from holding Frontier Lithium or generate 34.09% 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.  Frontier Lithium

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Frontier Lithium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Lithium are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Frontier Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ivanhoe Energy and Frontier Lithium

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

The idea behind Ivanhoe Energy and Frontier Lithium 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.