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

-0.4

Correlation Coefficient

Optimum International  Optimum Large

Very good diversification

The 3 months correlation between Optimum and Optimum is -0.4. 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 generate 0.63 times more return on investment than Optimum Large. However, Optimum International Fund is 1.59 times less risky than Optimum Large. It trades about 0.1 of its potential returns per unit of risk. Optimum Large Cap is currently generating about -0.13 per unit of risk. If you would invest  1,253  in Optimum International Fund on December 30, 2024 and sell it today you would earn a total of  67.00  from holding Optimum International Fund or generate 5.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Optimum International Fund  vs.  Optimum Large Cap

Optimum International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Optimum International Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Optimum International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Optimum Large Cap

Risk-Adjusted Performance

Very Weak

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

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.

The idea behind Optimum International Fund and Optimum Large Cap 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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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.