Correlation Between Optimum International and Optimum Fixed
Can any of the company-specific risk be diversified away by investing in both Optimum International 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 Optimum International and Optimum Fixed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Optimum International Fund and Optimum Fixed Income, you can compare the effects of market volatilities on Optimum International 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 Optimum International with a short position of Optimum Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optimum International and Optimum Fixed.
Diversification Opportunities for Optimum International and Optimum Fixed
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Optimum and Optimum is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Optimum International Fund 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 Optimum International 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 International Fund 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 Optimum International i.e., Optimum International and Optimum Fixed go up and down completely randomly.
Pair Corralation between Optimum International and Optimum Fixed
Assuming the 90 days horizon Optimum International Fund is expected to generate 1.98 times more return on investment than Optimum Fixed. However, Optimum International is 1.98 times more volatile than Optimum Fixed Income. It trades about 0.05 of its potential returns per unit of risk. Optimum Fixed Income is currently generating about 0.03 per unit of risk. If you would invest 1,090 in Optimum International Fund on September 1, 2024 and sell it today you would earn a total of 195.00 from holding Optimum International Fund or generate 17.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Optimum International Fund vs. Optimum Fixed Income
Performance |
| Timeline |
| Optimum International |
| Optimum Fixed Income |
Optimum International and Optimum Fixed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Optimum International and Optimum Fixed
The main advantage of trading using opposite Optimum International and Optimum Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimum International 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.The idea behind Optimum International Fund and Optimum Fixed Income 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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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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