Correlation Between Ivanhoe Mines and Falcon Energy

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

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

Diversification Opportunities for Ivanhoe Mines and Falcon Energy

0.68

Correlation Coefficient

Ivanhoe Mines  Falcon Energy

Poor diversification

The 3 months correlation between Ivanhoe and Falcon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Mines and Falcon Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Energy Materials and Ivanhoe Mines 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 Mines are associated (or correlated) with Falcon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Energy Materials has no effect on the direction of Ivanhoe Mines i.e., Ivanhoe Mines and Falcon Energy go up and down completely randomly.

Pair Corralation between Ivanhoe Mines and Falcon Energy

Assuming the 90 days trading horizon Ivanhoe Mines is expected to under-perform the Falcon Energy. But the stock apears to be less risky and, when comparing its historical volatility, Ivanhoe Mines is 1.33 times less risky than Falcon Energy. The stock trades about -0.09 of its potential returns per unit of risk. The Falcon Energy Materials is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  60.00  in Falcon Energy Materials on December 30, 2024 and sell it today you would lose (12.00) from holding Falcon Energy Materials or give up 20.0% of portfolio value over 90 days.

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

Ivanhoe Mines  vs.  Falcon Energy Materials

Ivanhoe Mines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ivanhoe Mines 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.

Falcon Energy Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Falcon Energy Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Ivanhoe Mines and Falcon Energy

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

The idea behind Ivanhoe Mines and Falcon Energy Materials 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.