Correlation Between Ivy Energy and Energy Fund

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

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

Diversification Opportunities for Ivy Energy and Energy Fund

0.79

Correlation Coefficient

Ivy Energy  Energy Fund

Poor diversification

The 3 months correlation between Ivy and Energy is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ivy Energy Fund and Energy Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Fund Class and Ivy 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 Ivy Energy Fund are associated (or correlated) with Energy Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fund Class has no effect on the direction of Ivy Energy i.e., Ivy Energy and Energy Fund go up and down completely randomly.

Pair Corralation between Ivy Energy and Energy Fund

Assuming the 90 days horizon Ivy Energy Fund is expected to under-perform the Energy Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ivy Energy Fund is 1.5 times less risky than Energy Fund. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Energy Fund Class is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  22,301  in Energy Fund Class on December 27, 2024 and sell it today you would earn a total of  1,095  from holding Energy Fund Class or generate 4.91% return on investment over 90 days.

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

Ivy Energy Fund  vs.  Energy Fund Class

Ivy Energy Fund

Risk-Adjusted Performance

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.

Energy Fund Class

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Fund Class are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Energy Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ivy Energy and Energy Fund

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

The idea behind Ivy Energy Fund and Energy Fund Class 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.