Correlation Between Optimum Small-mid and Ivy Small

Can any of the company-specific risk be diversified away by investing in both Optimum Small-mid and Ivy Small 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 Small 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 Small Cap, you can compare the effects of market volatilities on Optimum Small-mid and Ivy Small 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 Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optimum Small-mid and Ivy Small.

Diversification Opportunities for Optimum Small-mid and Ivy Small

0.93

Correlation Coefficient

Optimum Small-mid  Ivy Small

Almost no diversification

The 3 months correlation between Optimum and Ivy is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Optimum Small Mid Cap and Ivy Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Small Cap 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 Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Small Cap has no effect on the direction of Optimum Small-mid i.e., Optimum Small-mid and Ivy Small go up and down completely randomly.

Pair Corralation between Optimum Small-mid and Ivy Small

Assuming the 90 days horizon Optimum Small Mid Cap is expected to under-perform the Ivy Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Optimum Small Mid Cap is 1.62 times less risky than Ivy Small. The mutual fund trades about -0.27 of its potential returns per unit of risk. The Ivy Small Cap is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  1,268  in Ivy Small Cap on November 28, 2024 and sell it today you would lose (54.00) from holding Ivy Small Cap or give up 4.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Optimum Small Mid Cap  vs.  Ivy Small Cap

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 weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Ivy Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ivy Small 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 basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Optimum Small-mid and Ivy Small

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

The idea behind Optimum Small Mid Cap and Ivy Small 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.