Correlation Between Western Copper and Ivanhoe Mines

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

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

Diversification Opportunities for Western Copper and Ivanhoe Mines

0.35

Correlation Coefficient

Western Copper  Ivanhoe Mines

Weak diversification

The 3 months correlation between Western and Ivanhoe is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and Ivanhoe Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivanhoe Mines and Western Copper 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 Western Copper and 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 Western Copper i.e., Western Copper and Ivanhoe Mines go up and down completely randomly.

Pair Corralation between Western Copper and Ivanhoe Mines

Considering the 90-day investment horizon Western Copper and is expected to under-perform the Ivanhoe Mines. But the stock apears to be less risky and, when comparing its historical volatility, Western Copper and is 1.11 times less risky than Ivanhoe Mines. The stock trades about -0.06 of its potential returns per unit of risk. The Ivanhoe Mines is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,311  in Ivanhoe Mines on September 14, 2024 and sell it today you would lose (14.00) from holding Ivanhoe Mines or give up 1.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Western Copper and  vs.  Ivanhoe Mines

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

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 nearly stable basic indicators, Ivanhoe Mines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Western Copper and Ivanhoe Mines

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