Correlation Between Ivanhoe Mines and Rio Tinto

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

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

Diversification Opportunities for Ivanhoe Mines and Rio Tinto

0.92

Correlation Coefficient

Ivanhoe Mines  Rio Tinto

Almost no diversification

The 3 months correlation between Ivanhoe and Rio is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Mines and Rio Tinto ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto ADR 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 Rio Tinto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Tinto ADR has no effect on the direction of Ivanhoe Mines i.e., Ivanhoe Mines and Rio Tinto go up and down completely randomly.

Pair Corralation between Ivanhoe Mines and Rio Tinto

Assuming the 90 days horizon Ivanhoe Mines is expected to generate 1.75 times more return on investment than Rio Tinto. However, Ivanhoe Mines is 1.75 times more volatile than Rio Tinto ADR. It trades about 0.04 of its potential returns per unit of risk. Rio Tinto ADR is currently generating about -0.01 per unit of risk. If you would invest  872.00  in Ivanhoe Mines on October 7, 2024 and sell it today you would earn a total of  335.00  from holding Ivanhoe Mines or generate 38.42% return on investment over 90 days.

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

Ivanhoe Mines  vs.  Rio Tinto ADR

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.

Rio Tinto ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rio Tinto ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ivanhoe Mines and Rio Tinto

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

The idea behind Ivanhoe Mines and Rio Tinto ADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.