Correlation Between Ivy International and Ivy Emerging
Can any of the company-specific risk be diversified away by investing in both Ivy International 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 Ivy International and Ivy Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ivy International E and Ivy Emerging Markets, you can compare the effects of market volatilities on Ivy International 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 Ivy International with a short position of Ivy Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ivy International and Ivy Emerging.
Diversification Opportunities for Ivy International and Ivy Emerging
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ivy and Ivy is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ivy International E 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 Ivy International 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 International E 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 Ivy International i.e., Ivy International and Ivy Emerging go up and down completely randomly.
Pair Corralation between Ivy International and Ivy Emerging
Assuming the 90 days horizon Ivy International E is expected to generate 0.92 times more return on investment than Ivy Emerging. However, Ivy International E is 1.09 times less risky than Ivy Emerging. It trades about -0.09 of its potential returns per unit of risk. Ivy Emerging Markets is currently generating about -0.12 per unit of risk. If you would invest 2,147 in Ivy International E on August 31, 2024 and sell it today you would lose (32.00) from holding Ivy International E or give up 1.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ivy International E vs. Ivy Emerging Markets
Performance |
| Timeline |
| Ivy International |
| Ivy Emerging Markets |
Ivy International and Ivy Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ivy International and Ivy Emerging
The main advantage of trading using opposite Ivy International and Ivy Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ivy International 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 Ivy International E 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.
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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