Correlation Between Prudential Government and Ivy Value

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

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

Diversification Opportunities for Prudential Government and Ivy Value

0.0

Correlation Coefficient

Prudential Government  Ivy Value

Pay attention - limited upside

The 3 months correlation between Prudential and Ivy is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Money and Ivy Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Value Fund and Prudential Government 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 Prudential Government Money are associated (or correlated) with Ivy Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Value Fund has no effect on the direction of Prudential Government i.e., Prudential Government and Ivy Value go up and down completely randomly.

Pair Corralation between Prudential Government and Ivy Value

Assuming the 90 days horizon Prudential Government is expected to generate 4.61 times less return on investment than Ivy Value. But when comparing it to its historical volatility, Prudential Government Money is 3.99 times less risky than Ivy Value. It trades about 0.1 of its potential returns per unit of risk. Ivy Value Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,605  in Ivy Value Fund on October 3, 2024 and sell it today you would earn a total of  185.00  from holding Ivy Value Fund or generate 11.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	59.26%
Values	Daily Returns

Prudential Government Money  vs.  Ivy Value Fund

Prudential Government

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ivy Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Prudential Government and Ivy Value

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

The idea behind Prudential Government Money and Ivy Value Fund 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.