Correlation Between First American and Optimum Small
Can any of the company-specific risk be diversified away by investing in both First American and Optimum Small 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 First American and Optimum Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First American Funds and Optimum Small Mid Cap, you can compare the effects of market volatilities on First American and Optimum Small 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 First American with a short position of Optimum Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and Optimum Small.
Diversification Opportunities for First American and Optimum Small
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Optimum is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding First American Funds and Optimum Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Small Mid and First American 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 First American Funds are associated (or correlated) with Optimum Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Small Mid has no effect on the direction of First American i.e., First American and Optimum Small go up and down completely randomly.
Pair Corralation between First American and Optimum Small
Assuming the 90 days horizon First American Funds is expected to generate 15.9 times more return on investment than Optimum Small. However, First American is 15.9 times more volatile than Optimum Small Mid Cap. It trades about 0.03 of its potential returns per unit of risk. Optimum Small Mid Cap is currently generating about 0.05 per unit of risk. If you would invest 311.00 in First American Funds on September 3, 2024 and sell it today you would lose (211.00) from holding First American Funds or give up 67.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First American Funds vs. Optimum Small Mid Cap
Performance |
| Timeline |
| First American Funds |
| Optimum Small Mid |
First American and Optimum Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First American and Optimum Small
The main advantage of trading using opposite First American and Optimum Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American position performs unexpectedly, Optimum Small 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 Optimum Small will offset losses from the drop in Optimum Small's long position.| First American vs. Vanguard Total Stock | First American vs. Vanguard 500 Index | First American vs. Vanguard Total Stock | First American vs. Vanguard Total Stock |
| Optimum Small vs. Rbc Funds Trust | Optimum Small vs. First American Funds | Optimum Small vs. Wt Mutual Fund | Optimum Small vs. Hsbc Treasury Money |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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