Correlation Between Optimum Small and First Investors

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

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

Diversification Opportunities for Optimum Small and First Investors

0.94

Correlation Coefficient

Optimum Small  First Investors

Almost no diversification

The 3 months correlation between Optimum and First is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Optimum Small Mid Cap and First Investors Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Investors Growth and Optimum Small 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 Small Mid Cap are associated (or correlated) with First Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Investors Growth has no effect on the direction of Optimum Small i.e., Optimum Small and First Investors go up and down completely randomly.

Pair Corralation between Optimum Small and First Investors

Assuming the 90 days horizon Optimum Small is expected to generate 1.06 times less return on investment than First Investors. In addition to that, Optimum Small is 1.52 times more volatile than First Investors Growth. It trades about 0.1 of its total potential returns per unit of risk. First Investors Growth is currently generating about 0.16 per unit of volatility. If you would invest  1,470  in First Investors Growth on May 7, 2025 and sell it today you would earn a total of  109.00  from holding First Investors Growth or generate 7.41% return on investment over 90 days.

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

Optimum Small Mid Cap  vs.  First Investors Growth

Optimum Small Mid

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Optimum Small Mid Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Optimum Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

First Investors Growth

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Investors Growth are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, First Investors may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Optimum Small and First Investors

The main advantage of trading using opposite Optimum Small and First Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimum Small position performs unexpectedly, First Investors 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 First Investors will offset losses from the drop in First Investors' long position.

The idea behind Optimum Small Mid Cap and First Investors Growth 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.