Correlation Between Intermediate-term and Ivy Emerging

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

By analyzing existing cross correlation between Intermediate Term Bond Fund and Ivy Emerging Markets, you can compare the effects of market volatilities on Intermediate-term and Ivy Emerging 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 Intermediate-term with a short position of Ivy Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and Ivy Emerging.

Diversification Opportunities for Intermediate-term and Ivy Emerging

0.81

Correlation Coefficient

Intermediate-term  Ivy Emerging

Very poor diversification

The 3 months correlation between Intermediate-term and Ivy is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Bond Fund and Ivy Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Emerging Markets and Intermediate-term 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 Intermediate Term Bond Fund are associated (or correlated) with Ivy Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Emerging Markets has no effect on the direction of Intermediate-term i.e., Intermediate-term and Ivy Emerging go up and down completely randomly.

Pair Corralation between Intermediate-term and Ivy Emerging

Assuming the 90 days horizon Intermediate-term is expected to generate 1.64 times less return on investment than Ivy Emerging. But when comparing it to its historical volatility, Intermediate Term Bond Fund is 2.37 times less risky than Ivy Emerging. It trades about 0.03 of its potential returns per unit of risk. Ivy Emerging Markets is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,779  in Ivy Emerging Markets on October 5, 2024 and sell it today you would earn a total of  150.00  from holding Ivy Emerging Markets or generate 8.43% return on investment over 90 days.

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

Intermediate Term Bond Fund  vs.  Ivy Emerging Markets

Intermediate Term Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ivy Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Intermediate-term and Ivy Emerging

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

The idea behind Intermediate Term Bond Fund and Ivy Emerging Markets 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.