Correlation Between Optimum Large and Vanguard Value

Can any of the company-specific risk be diversified away by investing in both Optimum Large and Vanguard Value 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 Vanguard Value 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 Vanguard Value Index, you can compare the effects of market volatilities on Optimum Large and Vanguard Value 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 Vanguard Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optimum Large and Vanguard Value.

Diversification Opportunities for Optimum Large and Vanguard Value

0.99

Correlation Coefficient

Optimum Large  Vanguard Value

No risk reduction

The 3 months correlation between Optimum and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Optimum Large Cap and Vanguard Value Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Index 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 Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Index has no effect on the direction of Optimum Large i.e., Optimum Large and Vanguard Value go up and down completely randomly.

Pair Corralation between Optimum Large and Vanguard Value

Assuming the 90 days horizon Optimum Large Cap is expected to generate 1.76 times more return on investment than Vanguard Value. However, Optimum Large is 1.76 times more volatile than Vanguard Value Index. It trades about 0.05 of its potential returns per unit of risk. Vanguard Value Index is currently generating about 0.08 per unit of risk. If you would invest  1,631  in Optimum Large Cap on September 3, 2024 and sell it today you would earn a total of  486.00  from holding Optimum Large Cap or generate 29.8% 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.  Vanguard Value Index

Optimum Large Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Optimum Large Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Optimum Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Value Index

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Optimum Large and Vanguard Value

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

The idea behind Optimum Large Cap and Vanguard Value Index 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.

Check out your portfolio center.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.