Correlation Between Ivy Energy and Gamco Natural

Can any of the company-specific risk be diversified away by investing in both Ivy Energy and Gamco 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 Ivy Energy and Gamco Natural 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 Gamco Natural Resources, you can compare the effects of market volatilities on Ivy Energy and Gamco 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 Ivy Energy with a short position of Gamco Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ivy Energy and Gamco Natural.

Diversification Opportunities for Ivy Energy and Gamco Natural

0.73

Correlation Coefficient

Ivy Energy  Gamco Natural

Poor diversification

The 3 months correlation between IVY and Gamco is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ivy Energy Fund and Gamco Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamco Natural Resources 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 Gamco Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamco Natural Resources has no effect on the direction of Ivy Energy i.e., Ivy Energy and Gamco Natural go up and down completely randomly.

Pair Corralation between Ivy Energy and Gamco Natural

Assuming the 90 days horizon Ivy Energy Fund is expected to generate 1.3 times more return on investment than Gamco Natural. However, Ivy Energy is 1.3 times more volatile than Gamco Natural Resources. It trades about 0.03 of its potential returns per unit of risk. Gamco Natural Resources is currently generating about 0.01 per unit of risk. If you would invest  1,001  in Ivy Energy Fund on August 31, 2024 and sell it today you would earn a total of  13.00  from holding Ivy Energy Fund or generate 1.3% 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.  Gamco Natural Resources

Ivy Energy Fund

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ivy Energy Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ivy Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gamco Natural Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gamco Natural Resources are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gamco Natural 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 Gamco Natural

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

The idea behind Ivy Energy Fund and Gamco 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.