Correlation Between Optimum Large and Ivy Natural

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

Diversification Opportunities for Optimum Large and Ivy Natural

0.71

Correlation Coefficient

Optimum Large  Ivy Natural

Poor diversification

The 3 months correlation between Optimum and Ivy is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Optimum Large Cap and Ivy Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Natural Resources 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 Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Natural Resources has no effect on the direction of Optimum Large i.e., Optimum Large and Ivy Natural go up and down completely randomly.

Pair Corralation between Optimum Large and Ivy Natural

Assuming the 90 days horizon Optimum Large Cap is expected to under-perform the Ivy Natural. In addition to that, Optimum Large is 1.05 times more volatile than Ivy Natural Resources. It trades about -0.05 of its total potential returns per unit of risk. Ivy Natural Resources is currently generating about 0.11 per unit of volatility. If you would invest  1,576  in Ivy Natural Resources on September 12, 2024 and sell it today you would earn a total of  99.00  from holding Ivy Natural Resources or generate 6.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Optimum Large Cap  vs.  Ivy Natural Resources

Optimum Large Cap

Risk-Adjusted Performance

0 of 100

Modest

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

Ivy Natural Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ivy Natural Resources are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ivy Natural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Optimum Large and Ivy Natural

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

The idea behind Optimum Large Cap and Ivy 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.