Correlation Between First Investors and Ivy Large

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

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

Diversification Opportunities for First Investors and Ivy Large

-0.32

Correlation Coefficient

First Investors  Ivy Large

Very good diversification

The 3 months correlation between First and Ivy is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding First Investors Tax and Ivy Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Large Cap and First Investors 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 First Investors Tax are associated (or correlated) with Ivy Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Large Cap has no effect on the direction of First Investors i.e., First Investors and Ivy Large go up and down completely randomly.

Pair Corralation between First Investors and Ivy Large

Assuming the 90 days horizon First Investors is expected to generate 6.61 times less return on investment than Ivy Large. But when comparing it to its historical volatility, First Investors Tax is 2.65 times less risky than Ivy Large. It trades about 0.06 of its potential returns per unit of risk. Ivy Large Cap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,449  in Ivy Large Cap on September 5, 2024 and sell it today you would earn a total of  265.00  from holding Ivy Large Cap or generate 7.68% return on investment over 90 days.

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

First Investors Tax  vs.  Ivy Large Cap

First Investors Tax

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Investors Tax are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, First Investors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ivy Large Cap

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with First Investors and Ivy Large

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

The idea behind First Investors Tax and Ivy Large 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.