Correlation Between Ivanhoe Mines and Lithium Americas

Can any of the company-specific risk be diversified away by investing in both Ivanhoe Mines 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 Mines 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 Mines and Lithium Americas Corp, you can compare the effects of market volatilities on Ivanhoe Mines 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 Mines with a short position of Lithium Americas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ivanhoe Mines and Lithium Americas.

Diversification Opportunities for Ivanhoe Mines and Lithium Americas

0.43

Correlation Coefficient

Ivanhoe Mines  Lithium Americas

Very weak diversification

The 3 months correlation between Ivanhoe and Lithium is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Mines 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 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 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 Mines i.e., Ivanhoe Mines and Lithium Americas go up and down completely randomly.

Pair Corralation between Ivanhoe Mines and Lithium Americas

Assuming the 90 days horizon Ivanhoe Mines is expected to under-perform the Lithium Americas. But the otc stock apears to be less risky and, when comparing its historical volatility, Ivanhoe Mines is 1.55 times less risky than Lithium Americas. The otc stock trades about -0.24 of its potential returns per unit of risk. The Lithium Americas Corp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  388.00  in Lithium Americas Corp on October 22, 2024 and sell it today you would lose (39.00) from holding Lithium Americas Corp or give up 10.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.5%
Values	Daily Returns

Ivanhoe Mines  vs.  Lithium Americas Corp

Ivanhoe Mines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ivanhoe Mines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Lithium Americas Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lithium Americas Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Lithium Americas may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ivanhoe Mines and Lithium Americas

The main advantage of trading using opposite Ivanhoe Mines and Lithium Americas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ivanhoe Mines 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 Mines 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.