Correlation Between Optimum International and Optimum Small
Can any of the company-specific risk be diversified away by investing in both Optimum International and Optimum Small 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 Small 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 Small Mid Cap, you can compare the effects of market volatilities on Optimum International and Optimum Small 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 Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optimum International and Optimum Small.
Diversification Opportunities for Optimum International and Optimum Small
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Optimum and Optimum is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Optimum International Fund and Optimum Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Small Mid 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 Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Small Mid has no effect on the direction of Optimum International i.e., Optimum International and Optimum Small go up and down completely randomly.
Pair Corralation between Optimum International and Optimum Small
Assuming the 90 days horizon Optimum International is expected to generate 1.13 times less return on investment than Optimum Small. But when comparing it to its historical volatility, Optimum International Fund is 1.32 times less risky than Optimum Small. It trades about 0.06 of its potential returns per unit of risk. Optimum Small Mid Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,203 in Optimum Small Mid Cap on August 30, 2024 and sell it today you would earn a total of 342.00 from holding Optimum Small Mid Cap or generate 28.43% 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 Small Mid Cap
Performance |
| Timeline |
| Optimum International |
| Optimum Small Mid |
Optimum International and Optimum Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Optimum International and Optimum Small
The main advantage of trading using opposite Optimum International and Optimum Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimum International position performs unexpectedly, Optimum Small 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 Small will offset losses from the drop in Optimum Small's long position.| Optimum International vs. Msift High Yield | Optimum International vs. Pimco High Yield | Optimum International vs. Artisan High Income | Optimum International vs. Ppm High Yield |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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