Correlation Between World Energy and Ivy Energy

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

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

Diversification Opportunities for World Energy and Ivy Energy

-0.6

Correlation Coefficient

World Energy  Ivy Energy

Excellent diversification

The 3 months correlation between World and Ivy is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Ivy Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Energy Fund and World 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 World Energy Fund are associated (or correlated) with Ivy Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Energy Fund has no effect on the direction of World Energy i.e., World Energy and Ivy Energy go up and down completely randomly.

Pair Corralation between World Energy and Ivy Energy

Assuming the 90 days horizon World Energy Fund is expected to generate 1.51 times more return on investment than Ivy Energy. However, World Energy is 1.51 times more volatile than Ivy Energy Fund. It trades about -0.07 of its potential returns per unit of risk. Ivy Energy Fund is currently generating about -0.21 per unit of risk. If you would invest  1,497  in World Energy Fund on September 17, 2024 and sell it today you would lose (23.00) from holding World Energy Fund or give up 1.54% of portfolio value over 90 days.

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

World Energy Fund  vs.  Ivy Energy Fund

World Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in World Energy Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, World Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ivy Energy Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ivy Energy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ivy Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with World Energy and Ivy Energy

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

The idea behind World Energy Fund and Ivy Energy Fund 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.