Correlation Between Optimum Large and Optimum International

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

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

Diversification Opportunities for Optimum Large and Optimum International

0.94

Correlation Coefficient

Optimum Large  Optimum International

Almost no diversification

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

Pair Corralation between Optimum Large and Optimum International

Assuming the 90 days horizon Optimum Large Cap is expected to generate 1.38 times more return on investment than Optimum International. However, Optimum Large is 1.38 times more volatile than Optimum International Fund. It trades about 0.22 of its potential returns per unit of risk. Optimum International Fund is currently generating about 0.12 per unit of risk. If you would invest  1,238  in Optimum Large Cap on May 5, 2025 and sell it today you would earn a total of  163.00  from holding Optimum Large Cap or generate 13.17% return on investment over 90 days.

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

Optimum Large Cap  vs.  Optimum International Fund

Optimum Large Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Optimum Large Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Optimum Large showed solid returns over the last few months and may actually be approaching a breakup point.

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 9 (%) 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.

Pair Trading with Optimum Large and Optimum International

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

The idea behind Optimum Large Cap and Optimum International Fund 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.