Correlation Between Optimum Small and Vanguard Emerging

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

Diversification Opportunities for Optimum Small and Vanguard Emerging

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Optimum and VANGUARD is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Optimum Small Mid Cap and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets and Optimum Small 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 Optimum Small Mid Cap are associated (or correlated) with Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Optimum Small i.e., Optimum Small and Vanguard Emerging go up and down completely randomly.

Pair Corralation between Optimum Small and Vanguard Emerging

Assuming the 90 days horizon Optimum Small Mid Cap is expected to generate 1.73 times more return on investment than Vanguard Emerging. However, Optimum Small is 1.73 times more volatile than Vanguard Emerging Markets. It trades about 0.27 of its potential returns per unit of risk. Vanguard Emerging Markets is currently generating about -0.22 per unit of risk. If you would invest  1,162  in Optimum Small Mid Cap on August 29, 2024 and sell it today you would earn a total of  102.00  from holding Optimum Small Mid Cap or generate 8.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Optimum Small Mid Cap  vs.  Vanguard Emerging Markets

 Performance 
       Timeline  
Optimum Small Mid 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Optimum Small Mid Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Optimum Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Vanguard Emerging Markets 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Emerging Markets are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Vanguard Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Optimum Small and Vanguard Emerging Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Optimum Small and Vanguard Emerging

The main advantage of trading using opposite Optimum Small and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimum Small position performs unexpectedly, Vanguard 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 Vanguard Emerging will offset losses from the drop in Vanguard Emerging's long position.
The idea behind Optimum Small Mid Cap and Vanguard 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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