Correlation Between Teck Resources and Ivanhoe Mines

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

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

Diversification Opportunities for Teck Resources and Ivanhoe Mines

0.8

Correlation Coefficient

Teck Resources  Ivanhoe Mines

Very poor diversification

The 3 months correlation between Teck and Ivanhoe is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources Limited and Ivanhoe Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivanhoe Mines and Teck Resources 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 Teck Resources Limited are associated (or correlated) with Ivanhoe Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivanhoe Mines has no effect on the direction of Teck Resources i.e., Teck Resources and Ivanhoe Mines go up and down completely randomly.

Pair Corralation between Teck Resources and Ivanhoe Mines

Assuming the 90 days trading horizon Teck Resources is expected to generate 2.24 times less return on investment than Ivanhoe Mines. But when comparing it to its historical volatility, Teck Resources Limited is 1.09 times less risky than Ivanhoe Mines. It trades about 0.02 of its potential returns per unit of risk. Ivanhoe Mines is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,070  in Ivanhoe Mines on September 20, 2024 and sell it today you would earn a total of  617.00  from holding Ivanhoe Mines or generate 57.66% return on investment over 90 days.

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

Teck Resources Limited  vs.  Ivanhoe Mines

Teck Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teck Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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. 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.

Pair Trading with Teck Resources and Ivanhoe Mines

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

The idea behind Teck Resources Limited and Ivanhoe Mines 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.