Correlation Between Ivanhoe Energy and Rio2

Can any of the company-specific risk be diversified away by investing in both Ivanhoe Energy and Rio2 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 Rio2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ivanhoe Energy and Rio2, you can compare the effects of market volatilities on Ivanhoe Energy and Rio2 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 Rio2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ivanhoe Energy and Rio2.

Diversification Opportunities for Ivanhoe Energy and Rio2

-0.76

Correlation Coefficient

Ivanhoe Energy  Rio2

Pay attention - limited upside

The 3 months correlation between Ivanhoe and Rio2 is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Energy and Rio2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio2 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 Rio2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio2 has no effect on the direction of Ivanhoe Energy i.e., Ivanhoe Energy and Rio2 go up and down completely randomly.

Pair Corralation between Ivanhoe Energy and Rio2

Assuming the 90 days horizon Ivanhoe Energy is expected to under-perform the Rio2. In addition to that, Ivanhoe Energy is 1.3 times more volatile than Rio2. It trades about -0.04 of its total potential returns per unit of risk. Rio2 is currently generating about 0.18 per unit of volatility. If you would invest  60.00  in Rio2 on December 20, 2024 and sell it today you would earn a total of  21.00  from holding Rio2 or generate 35.0% return on investment over 90 days.

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

Ivanhoe Energy  vs.  Rio2

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Rio2

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rio2 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Rio2 showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ivanhoe Energy and Rio2

The main advantage of trading using opposite Ivanhoe Energy and Rio2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ivanhoe Energy position performs unexpectedly, Rio2 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 Rio2 will offset losses from the drop in Rio2's long position.

The idea behind Ivanhoe Energy and Rio2 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.