Correlation Between Optimum Small-mid and Ivy Core

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

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

Diversification Opportunities for Optimum Small-mid and Ivy Core

0.9

Correlation Coefficient

Optimum Small-mid  Ivy Core

Almost no diversification

The 3 months correlation between Optimum and Ivy is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Optimum Small Mid Cap and Ivy E Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy E Equity and Optimum Small-mid 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 Small Mid Cap are associated (or correlated) with Ivy Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy E Equity has no effect on the direction of Optimum Small-mid i.e., Optimum Small-mid and Ivy Core go up and down completely randomly.

Pair Corralation between Optimum Small-mid and Ivy Core

Assuming the 90 days horizon Optimum Small Mid Cap is expected to under-perform the Ivy Core. In addition to that, Optimum Small-mid is 1.39 times more volatile than Ivy E Equity. It trades about -0.14 of its total potential returns per unit of risk. Ivy E Equity is currently generating about -0.06 per unit of volatility. If you would invest  1,709  in Ivy E Equity on December 29, 2024 and sell it today you would lose (70.00) from holding Ivy E Equity or give up 4.1% of portfolio value over 90 days.

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

Optimum Small Mid Cap  vs.  Ivy E Equity

Optimum Small Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optimum Small Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Ivy E Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ivy E Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ivy Core 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 Small-mid and Ivy Core

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

The idea behind Optimum Small Mid Cap and Ivy E Equity 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.