Correlation Between Sarofim Equity and Optimum Large

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

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

Diversification Opportunities for Sarofim Equity and Optimum Large

0.83

Correlation Coefficient

Sarofim Equity  Optimum Large

Very poor diversification

The 3 months correlation between Sarofim and Optimum is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sarofim Equity 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 Sarofim Equity 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 Sarofim Equity 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 Sarofim Equity i.e., Sarofim Equity and Optimum Large go up and down completely randomly.

Pair Corralation between Sarofim Equity and Optimum Large

Assuming the 90 days horizon Sarofim Equity is expected to generate 1.38 times less return on investment than Optimum Large. But when comparing it to its historical volatility, Sarofim Equity is 1.9 times less risky than Optimum Large. It trades about 0.09 of its potential returns per unit of risk. Optimum Large Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,420  in Optimum Large Cap on September 12, 2024 and sell it today you would earn a total of  120.00  from holding Optimum Large Cap or generate 4.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Sarofim Equity  vs.  Optimum Large Cap

Sarofim Equity

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sarofim Equity are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Sarofim Equity 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

5 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Optimum Large Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Optimum Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sarofim Equity and Optimum Large

The main advantage of trading using opposite Sarofim Equity and Optimum Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sarofim Equity 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 Sarofim Equity 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 Valuation module to check real value of public entities based on technical and fundamental data.