Correlation Between Optimism and IOTA
Can any of the company-specific risk be diversified away by investing in both Optimism and IOTA 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 Optimism and IOTA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Optimism and IOTA, you can compare the effects of market volatilities on Optimism and IOTA 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 Optimism with a short position of IOTA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optimism and IOTA.
Diversification Opportunities for Optimism and IOTA
Very weak diversification
The 3 months correlation between Optimism and IOTA is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Optimism and IOTA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IOTA and Optimism 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 Optimism are associated (or correlated) with IOTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IOTA has no effect on the direction of Optimism i.e., Optimism and IOTA go up and down completely randomly.
Pair Corralation between Optimism and IOTA
Assuming the 90 days horizon Optimism is expected to under-perform the IOTA. But the crypto coin apears to be less risky and, when comparing its historical volatility, Optimism is 1.16 times less risky than IOTA. The crypto coin trades about -0.36 of its potential returns per unit of risk. The IOTA is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest 30.00 in IOTA on November 9, 2024 and sell it today you would lose (9.00) from holding IOTA or give up 30.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Optimism vs. IOTA
Performance |
| Timeline |
| Optimism |
| IOTA |
Optimism and IOTA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Optimism and IOTA
The main advantage of trading using opposite Optimism and IOTA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimism position performs unexpectedly, IOTA 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 IOTA will offset losses from the drop in IOTA's long position.The idea behind Optimism and IOTA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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