Correlation Between Small Cap and Ivy Core

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Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Ivy Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Ivy E Equity, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Ivy Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Ivy Core.

Diversification Opportunities for Small Cap and Ivy Core

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Small and Ivy is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock 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 Small Cap 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 Small Cap Stock 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 Small Cap i.e., Small Cap and Ivy Core go up and down completely randomly.

Pair Corralation between Small Cap and Ivy Core

Assuming the 90 days horizon Small Cap Stock is expected to generate 1.63 times more return on investment than Ivy Core. However, Small Cap is 1.63 times more volatile than Ivy E Equity. It trades about 0.09 of its potential returns per unit of risk. Ivy E Equity is currently generating about 0.14 per unit of risk. If you would invest  1,412  in Small Cap Stock on August 28, 2024 and sell it today you would earn a total of  101.00  from holding Small Cap Stock or generate 7.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Small Cap Stock  vs.  Ivy E Equity

 Performance 
       Timeline  
Small Cap Stock 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Stock are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Cap may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Ivy E Equity 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ivy E Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Ivy Core may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Small Cap and Ivy Core Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Small Cap and Ivy Core

The main advantage of trading using opposite Small Cap and Ivy Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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 Small Cap Stock 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.
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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