Correlation Between Ivanhoe Energy and Sun Summit
Can any of the company-specific risk be diversified away by investing in both Ivanhoe Energy and Sun Summit 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 Energy and Sun Summit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ivanhoe Energy and Sun Summit Minerals, you can compare the effects of market volatilities on Ivanhoe Energy and Sun Summit 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 Energy with a short position of Sun Summit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ivanhoe Energy and Sun Summit.
Diversification Opportunities for Ivanhoe Energy and Sun Summit
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ivanhoe and Sun is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ivanhoe Energy and Sun Summit Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Summit Minerals and Ivanhoe Energy 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 Energy are associated (or correlated) with Sun Summit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Summit Minerals has no effect on the direction of Ivanhoe Energy i.e., Ivanhoe Energy and Sun Summit go up and down completely randomly.
Pair Corralation between Ivanhoe Energy and Sun Summit
Assuming the 90 days horizon Ivanhoe Energy is expected to under-perform the Sun Summit. But the stock apears to be less risky and, when comparing its historical volatility, Ivanhoe Energy is 2.08 times less risky than Sun Summit. The stock trades about -0.11 of its potential returns per unit of risk. The Sun Summit Minerals is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 14.00 in Sun Summit Minerals on November 28, 2024 and sell it today you would lose (1.00) from holding Sun Summit Minerals or give up 7.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ivanhoe Energy vs. Sun Summit Minerals
Performance |
| Timeline |
| Ivanhoe Energy |
| Sun Summit Minerals |
Ivanhoe Energy and Sun Summit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ivanhoe Energy and Sun Summit
The main advantage of trading using opposite Ivanhoe Energy and Sun Summit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ivanhoe Energy position performs unexpectedly, Sun Summit 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 Sun Summit will offset losses from the drop in Sun Summit's long position.| Ivanhoe Energy vs. Questerre Energy | Ivanhoe Energy vs. Ivanhoe Mines | Ivanhoe Energy vs. Eastern Platinum Limited |
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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Sun Summit as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Sun Summit's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Sun Summit's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Sun Summit Minerals.
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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