Correlation Between Optimum Large and Ivy Large

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

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

Diversification Opportunities for Optimum Large and Ivy Large

0.66

Correlation Coefficient

Optimum Large  Ivy Large

Poor diversification

The 3 months correlation between Optimum and Ivy is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Optimum Large Cap 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 Optimum Large 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 Optimum Large Cap 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 Optimum Large i.e., Optimum Large and Ivy Large go up and down completely randomly.

Pair Corralation between Optimum Large and Ivy Large

Assuming the 90 days horizon Optimum Large Cap is expected to under-perform the Ivy Large. In addition to that, Optimum Large is 1.99 times more volatile than Ivy Large Cap. It trades about -0.14 of its total potential returns per unit of risk. Ivy Large Cap is currently generating about -0.08 per unit of volatility. If you would invest  3,767  in Ivy Large Cap on December 2, 2024 and sell it today you would lose (183.00) from holding Ivy Large Cap or give up 4.86% of portfolio value over 90 days.

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

Optimum Large Cap  vs.  Ivy Large Cap

Optimum Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optimum Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Ivy Large Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Optimum Large and Ivy Large

The main advantage of trading using opposite Optimum Large and Ivy Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimum Large 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 Optimum Large Cap 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.