Correlation Between Optimum Small and Delaware High

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

Diversification Opportunities for Optimum Small and Delaware High

0.49

Correlation Coefficient

Optimum Small  Delaware High

Very weak diversification

The 3 months correlation between Optimum and Delaware is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Optimum Small Mid Cap and Delaware High Yield Opportunit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delaware High Yield 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 Delaware High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delaware High Yield has no effect on the direction of Optimum Small i.e., Optimum Small and Delaware High go up and down completely randomly.

Pair Corralation between Optimum Small and Delaware High

Assuming the 90 days horizon Optimum Small Mid Cap is expected to generate 6.95 times more return on investment than Delaware High. However, Optimum Small is 6.95 times more volatile than Delaware High Yield Opportunities. It trades about 0.36 of its potential returns per unit of risk. Delaware High Yield Opportunities is currently generating about 0.12 per unit of risk. If you would invest  1,296  in Optimum Small Mid Cap on February 17, 2024 and sell it today you would earn a total of  80.00  from holding Optimum Small Mid Cap or generate 6.17% return on investment over 90 days.

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

Optimum Small Mid Cap  vs.  Delaware High Yield Opportunit

Optimum Small Mid

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Optimum Small Mid Cap are ranked lower than 10 (%) 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 June 2024.

Delaware High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delaware High Yield Opportunities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Delaware High 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 Small and Delaware High

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

The idea behind Optimum Small Mid Cap and Delaware High Yield Opportunities 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.