Correlation Between Health Care and Ivy Energy

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

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

Diversification Opportunities for Health Care and Ivy Energy

0.45

Correlation Coefficient

Health Care  Ivy Energy

Very weak diversification

The 3 months correlation between Health and IVY is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Fund and Ivy Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Energy Fund and Health Care 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 Health Care Fund are associated (or correlated) with Ivy Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Energy Fund has no effect on the direction of Health Care i.e., Health Care and Ivy Energy go up and down completely randomly.

Pair Corralation between Health Care and Ivy Energy

Assuming the 90 days horizon Health Care Fund is expected to under-perform the Ivy Energy. But the mutual fund apears to be less risky and, when comparing its historical volatility, Health Care Fund is 1.22 times less risky than Ivy Energy. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Ivy Energy Fund is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,001  in Ivy Energy Fund on August 31, 2024 and sell it today you would earn a total of  13.00  from holding Ivy Energy Fund or generate 1.3% return on investment over 90 days.

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

Health Care Fund  vs.  Ivy Energy Fund

Health Care Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ivy Energy Fund

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ivy Energy Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ivy Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Health Care and Ivy Energy

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

The idea behind Health Care Fund and Ivy Energy 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.