Correlation Between Large Cap and Optimum Fixed

Can any of the company-specific risk be diversified away by investing in both Large Cap 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 Large Cap and Optimum Fixed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Large Cap Growth Profund and Optimum Fixed Income, you can compare the effects of market volatilities on Large Cap 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 Large Cap with a short position of Optimum Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Optimum Fixed.

Diversification Opportunities for Large Cap and Optimum Fixed

-0.54

Correlation Coefficient

Large Cap  Optimum Fixed

Excellent diversification

The 3 months correlation between Large and Optimum is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund 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 Large Cap 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 Large Cap Growth Profund 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 Large Cap i.e., Large Cap and Optimum Fixed go up and down completely randomly.

Pair Corralation between Large Cap and Optimum Fixed

Assuming the 90 days horizon Large Cap Growth Profund is expected to under-perform the Optimum Fixed. In addition to that, Large Cap is 4.94 times more volatile than Optimum Fixed Income. It trades about -0.11 of its total potential returns per unit of risk. Optimum Fixed Income is currently generating about 0.16 per unit of volatility. If you would invest  849.00  in Optimum Fixed Income on December 21, 2024 and sell it today you would earn a total of  24.00  from holding Optimum Fixed Income or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Large Cap Growth Profund  vs.  Optimum Fixed Income

Large Cap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Cap Growth Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Optimum Fixed Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Optimum Fixed Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Optimum Fixed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Large Cap and Optimum Fixed

The main advantage of trading using opposite Large Cap and Optimum Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap 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 Large Cap Growth Profund 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.