Correlation Between Optimum International and Optimum Large
Can any of the company-specific risk be diversified away by investing in both Optimum International and Optimum Large 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 Large 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 Large Cap, you can compare the effects of market volatilities on Optimum International and Optimum Large 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 Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optimum International and Optimum Large.
Diversification Opportunities for Optimum International and Optimum Large
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Optimum and Optimum is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Optimum International Fund and Optimum Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Large Cap 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 Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Large Cap has no effect on the direction of Optimum International i.e., Optimum International and Optimum Large go up and down completely randomly.
Pair Corralation between Optimum International and Optimum Large
Assuming the 90 days horizon Optimum International Fund is expected to under-perform the Optimum Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Optimum International Fund is 1.07 times less risky than Optimum Large. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Optimum Large Cap is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,003 in Optimum Large Cap on August 29, 2024 and sell it today you would earn a total of 66.00 from holding Optimum Large Cap or generate 3.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Optimum International Fund vs. Optimum Large Cap
Performance |
| Timeline |
| Optimum International |
| Optimum Large Cap |
Optimum International and Optimum Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Optimum International and Optimum Large
The main advantage of trading using opposite Optimum International and Optimum Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimum International position performs unexpectedly, Optimum Large 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 Large will offset losses from the drop in Optimum Large's long position.| Optimum International vs. Scharf Global Opportunity | Optimum International vs. Balanced Fund Investor | Optimum International vs. Materials Portfolio Fidelity | Optimum International vs. Iaadx |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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