Correlation Between Ivy High and Ivy Core

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

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

Diversification Opportunities for Ivy High and Ivy Core

0.8

Correlation Coefficient

Ivy High  Ivy Core

Very poor diversification

The 3 months correlation between Ivy and Ivy is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ivy High Income 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 Ivy High 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 Ivy High Income 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 Ivy High i.e., Ivy High and Ivy Core go up and down completely randomly.

Pair Corralation between Ivy High and Ivy Core

Assuming the 90 days horizon Ivy High Income is expected to generate 0.3 times more return on investment than Ivy Core. However, Ivy High Income is 3.33 times less risky than Ivy Core. It trades about -0.1 of its potential returns per unit of risk. Ivy E Equity is currently generating about -0.04 per unit of risk. If you would invest  598.00  in Ivy High Income on December 18, 2024 and sell it today you would lose (10.00) from holding Ivy High Income or give up 1.67% of portfolio value over 90 days.

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

Ivy High Income  vs.  Ivy E Equity

Ivy High Income

Risk-Adjusted Performance

Very Weak

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

The main advantage of trading using opposite Ivy High and Ivy Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ivy High 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 Ivy High Income 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.