Correlation Between First Investors and Optimum Fixed
Can any of the company-specific risk be diversified away by investing in both First Investors and Optimum Fixed 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 Investors and Optimum Fixed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Investors Tax and Optimum Fixed Income, you can compare the effects of market volatilities on First Investors and Optimum Fixed 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 Investors with a short position of Optimum Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Investors and Optimum Fixed.
Diversification Opportunities for First Investors and Optimum Fixed
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Optimum is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding First Investors Tax and Optimum Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Fixed Income and First Investors 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 Investors Tax are associated (or correlated) with Optimum Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Fixed Income has no effect on the direction of First Investors i.e., First Investors and Optimum Fixed go up and down completely randomly.
Pair Corralation between First Investors and Optimum Fixed
Assuming the 90 days horizon First Investors Tax is expected to generate 0.85 times more return on investment than Optimum Fixed. However, First Investors Tax is 1.18 times less risky than Optimum Fixed. It trades about 0.12 of its potential returns per unit of risk. Optimum Fixed Income is currently generating about 0.09 per unit of risk. If you would invest 1,198 in First Investors Tax on September 1, 2024 and sell it today you would earn a total of 53.00 from holding First Investors Tax or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Investors Tax vs. Optimum Fixed Income
Performance |
| Timeline |
| First Investors Tax |
| Optimum Fixed Income |
First Investors and Optimum Fixed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Investors and Optimum Fixed
The main advantage of trading using opposite First Investors and Optimum Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Investors position performs unexpectedly, Optimum Fixed 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 Fixed will offset losses from the drop in Optimum Fixed's long position.| First Investors vs. Optimum Small Mid Cap | First Investors vs. Optimum Small Mid Cap | First Investors vs. Ivy Apollo Multi Asset | First Investors vs. Optimum Fixed Income |
| Optimum Fixed vs. Optimum Small Mid Cap | Optimum Fixed vs. Optimum Small Mid Cap | Optimum Fixed vs. Ivy Apollo Multi Asset | Optimum Fixed vs. Optimum Fixed Income |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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