Correlation Between Optimum Small-mid and First Investors

Can any of the company-specific risk be diversified away by investing in both Optimum Small-mid 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-mid 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 Select, you can compare the effects of market volatilities on Optimum Small-mid 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-mid with a short position of First Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optimum Small-mid and First Investors.

Diversification Opportunities for Optimum Small-mid and First Investors

0.95

Correlation Coefficient

Optimum Small-mid  First Investors

Almost no diversification

The 3 months correlation between Optimum and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Optimum Small Mid Cap and First Investors Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Investors Select and Optimum Small-mid 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 Select has no effect on the direction of Optimum Small-mid i.e., Optimum Small-mid and First Investors go up and down completely randomly.

Pair Corralation between Optimum Small-mid and First Investors

Assuming the 90 days horizon Optimum Small-mid is expected to generate 1.0 times less return on investment than First Investors. In addition to that, Optimum Small-mid is 1.33 times more volatile than First Investors Select. It trades about 0.2 of its total potential returns per unit of risk. First Investors Select is currently generating about 0.26 per unit of volatility. If you would invest  1,134  in First Investors Select on April 25, 2025 and sell it today you would earn a total of  160.00  from holding First Investors Select or generate 14.11% 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 Select

Optimum Small Mid

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Optimum Small Mid Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Optimum Small-mid showed solid returns over the last few months and may actually be approaching a breakup point.

First Investors Select

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Investors Select are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, First Investors showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Optimum Small-mid and First Investors

The main advantage of trading using opposite Optimum Small-mid and First Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimum Small-mid 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 Select 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.