Correlation Between Ivy High and Extended Market

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Can any of the company-specific risk be diversified away by investing in both Ivy High and Extended Market 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 Extended Market 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 Extended Market Index, you can compare the effects of market volatilities on Ivy High and Extended Market 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 Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ivy High and Extended Market.

Diversification Opportunities for Ivy High and Extended Market

IvyExtendedDiversified AwayIvyExtendedDiversified Away100%
0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Ivy and Extended is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Ivy High Income and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index 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 Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of Ivy High i.e., Ivy High and Extended Market go up and down completely randomly.

Pair Corralation between Ivy High and Extended Market

Assuming the 90 days horizon Ivy High Income is expected to generate 0.25 times more return on investment than Extended Market. However, Ivy High Income is 4.05 times less risky than Extended Market. It trades about 0.06 of its potential returns per unit of risk. Extended Market Index is currently generating about 0.01 per unit of risk. If you would invest  568.00  in Ivy High Income on November 21, 2024 and sell it today you would earn a total of  27.00  from holding Ivy High Income or generate 4.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Ivy High Income  vs.  Extended Market Index

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50
JavaScript chart by amCharts 3.21.15IVHIX USMIX
       Timeline  
Ivy High Income 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb5.925.945.965.9866.026.046.06
Extended Market Index 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Extended Market Index 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 forward indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2122232425

Ivy High and Extended Market Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.41-0.21-0.0831-0.0426-0.0040550.03030.06820.130.330.53 1234
JavaScript chart by amCharts 3.21.15IVHIX USMIX
       Returns  

Pair Trading with Ivy High and Extended Market

The main advantage of trading using opposite Ivy High and Extended Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ivy High position performs unexpectedly, Extended Market 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 Extended Market will offset losses from the drop in Extended Market's long position.
The idea behind Ivy High Income and Extended Market Index 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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