Correlation Between Europac Gold and Ivy Natural

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

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

Diversification Opportunities for Europac Gold and Ivy Natural

0.48

Correlation Coefficient

Europac Gold  Ivy Natural

Very weak diversification

The 3 months correlation between Europac and Ivy is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Europac Gold Fund and Ivy Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Natural Resources and Europac Gold 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 Europac Gold Fund are associated (or correlated) with Ivy Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Natural Resources has no effect on the direction of Europac Gold i.e., Europac Gold and Ivy Natural go up and down completely randomly.

Pair Corralation between Europac Gold and Ivy Natural

Assuming the 90 days horizon Europac Gold Fund is expected to generate 1.57 times more return on investment than Ivy Natural. However, Europac Gold is 1.57 times more volatile than Ivy Natural Resources. It trades about 0.02 of its potential returns per unit of risk. Ivy Natural Resources is currently generating about -0.12 per unit of risk. If you would invest  1,020  in Europac Gold Fund on December 3, 2024 and sell it today you would earn a total of  13.00  from holding Europac Gold Fund or generate 1.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Europac Gold Fund  vs.  Ivy Natural Resources

Europac Gold

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Europac Gold Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Europac Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ivy Natural Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ivy Natural Resources has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Europac Gold and Ivy Natural

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

The idea behind Europac Gold Fund and Ivy Natural Resources 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 Transaction History module to view history of all your transactions and understand their impact on performance.