Correlation Between Optimum International and Balanced Fund
Can any of the company-specific risk be diversified away by investing in both Optimum International and Balanced Fund 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 Balanced Fund 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 Balanced Fund Investor, you can compare the effects of market volatilities on Optimum International and Balanced Fund 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 Balanced Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optimum International and Balanced Fund.
Diversification Opportunities for Optimum International and Balanced Fund
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Optimum and Balanced is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Optimum International Fund and Balanced Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Investor 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 Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Investor has no effect on the direction of Optimum International i.e., Optimum International and Balanced Fund go up and down completely randomly.
Pair Corralation between Optimum International and Balanced Fund
Assuming the 90 days horizon Optimum International is expected to generate 3.19 times less return on investment than Balanced Fund. In addition to that, Optimum International is 1.53 times more volatile than Balanced Fund Investor. It trades about 0.07 of its total potential returns per unit of risk. Balanced Fund Investor is currently generating about 0.34 per unit of volatility. If you would invest 1,954 in Balanced Fund Investor on September 1, 2024 and sell it today you would earn a total of 64.00 from holding Balanced Fund Investor or generate 3.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Optimum International Fund vs. Balanced Fund Investor
Performance |
| Timeline |
| Optimum International |
| Balanced Fund Investor |
Optimum International and Balanced Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Optimum International and Balanced Fund
The main advantage of trading using opposite Optimum International and Balanced Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimum International position performs unexpectedly, Balanced Fund 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 Balanced Fund will offset losses from the drop in Balanced Fund's long position.The idea behind Optimum International Fund and Balanced Fund Investor 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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