Correlation Between Ivanhoe Energy and Tower Resources

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

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

Diversification Opportunities for Ivanhoe Energy and Tower Resources

0.65

Correlation Coefficient

Ivanhoe Energy  Tower Resources

Poor diversification

The 3 months correlation between Ivanhoe and Tower is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Energy and Tower Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Resources 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 Tower Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Resources has no effect on the direction of Ivanhoe Energy i.e., Ivanhoe Energy and Tower Resources go up and down completely randomly.

Pair Corralation between Ivanhoe Energy and Tower Resources

Assuming the 90 days horizon Ivanhoe Energy is expected to under-perform the Tower Resources. But the stock apears to be less risky and, when comparing its historical volatility, Ivanhoe Energy is 1.27 times less risky than Tower Resources. The stock trades about -0.2 of its potential returns per unit of risk. The Tower Resources is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Tower Resources on September 4, 2024 and sell it today you would lose (1.00) from holding Tower Resources or give up 7.14% of portfolio value over 90 days.

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

Ivanhoe Energy  vs.  Tower Resources

Ivanhoe Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ivanhoe Energy are ranked lower than 13 (%) 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.

Tower Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tower Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ivanhoe Energy and Tower Resources

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

The idea behind Ivanhoe Energy and Tower Resources 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.