Correlation Between Balanced Fund and Ivy Small

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

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

Diversification Opportunities for Balanced Fund and Ivy Small

0.7

Correlation Coefficient

Balanced Fund  Ivy Small

Poor diversification

The 3 months correlation between Balanced and Ivy is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Ivy Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Small Cap and Balanced Fund 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 Balanced Fund Retail are associated (or correlated) with Ivy Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Small Cap has no effect on the direction of Balanced Fund i.e., Balanced Fund and Ivy Small go up and down completely randomly.

Pair Corralation between Balanced Fund and Ivy Small

Assuming the 90 days horizon Balanced Fund Retail is expected to under-perform the Ivy Small. In addition to that, Balanced Fund is 1.14 times more volatile than Ivy Small Cap. It trades about -0.18 of its total potential returns per unit of risk. Ivy Small Cap is currently generating about -0.11 per unit of volatility. If you would invest  1,282  in Ivy Small Cap on October 7, 2024 and sell it today you would lose (93.00) from holding Ivy Small Cap or give up 7.25% of portfolio value over 90 days.

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

Balanced Fund Retail  vs.  Ivy Small Cap

Balanced Fund Retail

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ivy Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Balanced Fund and Ivy Small

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

The idea behind Balanced Fund Retail and Ivy Small Cap 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.