Correlation Between Ivy E and Ivy Mid

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

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

Diversification Opportunities for Ivy E and Ivy Mid

0.78

Correlation Coefficient

Ivy E  Ivy Mid

Poor diversification

The 3 months correlation between Ivy and Ivy is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ivy E Equity and Ivy Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Mid Cap and Ivy E 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 E Equity are associated (or correlated) with Ivy Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Mid Cap has no effect on the direction of Ivy E i.e., Ivy E and Ivy Mid go up and down completely randomly.

Pair Corralation between Ivy E and Ivy Mid

Assuming the 90 days horizon Ivy E Equity is expected to under-perform the Ivy Mid. In addition to that, Ivy E is 3.02 times more volatile than Ivy Mid Cap. It trades about -0.26 of its total potential returns per unit of risk. Ivy Mid Cap is currently generating about -0.24 per unit of volatility. If you would invest  2,929  in Ivy Mid Cap on October 12, 2024 and sell it today you would lose (159.00) from holding Ivy Mid Cap or give up 5.43% of portfolio value over 90 days.

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

Ivy E Equity  vs.  Ivy Mid Cap

Ivy E Equity

Risk-Adjusted Performance

0 of 100

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

Ivy Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ivy Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Ivy E and Ivy Mid

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

The idea behind Ivy E Equity and Ivy Mid 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.