Correlation Between Ivanhoe Energy and Lithium Americas

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

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

Diversification Opportunities for Ivanhoe Energy and Lithium Americas

0.87

Correlation Coefficient

Ivanhoe Energy  Lithium Americas

Very poor diversification

The 3 months correlation between Ivanhoe and Lithium is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Energy and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas 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 Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Ivanhoe Energy i.e., Ivanhoe Energy and Lithium Americas go up and down completely randomly.

Pair Corralation between Ivanhoe Energy and Lithium Americas

Assuming the 90 days horizon Ivanhoe Energy is expected to under-perform the Lithium Americas. But the stock apears to be less risky and, when comparing its historical volatility, Ivanhoe Energy is 1.19 times less risky than Lithium Americas. The stock trades about -0.15 of its potential returns per unit of risk. The Lithium Americas Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  585.00  in Lithium Americas Corp on September 3, 2024 and sell it today you would lose (24.00) from holding Lithium Americas Corp or give up 4.1% 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.  Lithium Americas Corp

Ivanhoe Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ivanhoe Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ivanhoe Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Lithium Americas Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Americas Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Lithium Americas displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ivanhoe Energy and Lithium Americas

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

The idea behind Ivanhoe Energy and Lithium Americas 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.