Correlation Between Staked Ether and Optimism
Can any of the company-specific risk be diversified away by investing in both Staked Ether and Optimism 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 Staked Ether and Optimism into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Staked Ether and Optimism, you can compare the effects of market volatilities on Staked Ether and Optimism 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 Staked Ether with a short position of Optimism. Check out your portfolio center. Please also check ongoing floating volatility patterns of Staked Ether and Optimism.
Diversification Opportunities for Staked Ether and Optimism
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Staked and Optimism is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Staked Ether and Optimism in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimism and Staked Ether 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 Staked Ether are associated (or correlated) with Optimism. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimism has no effect on the direction of Staked Ether i.e., Staked Ether and Optimism go up and down completely randomly.
Pair Corralation between Staked Ether and Optimism
Assuming the 90 days trading horizon Staked Ether is expected to generate 3.08 times less return on investment than Optimism. But when comparing it to its historical volatility, Staked Ether is 1.56 times less risky than Optimism. It trades about 0.01 of its potential returns per unit of risk. Optimism is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 255.00 in Optimism on August 29, 2024 and sell it today you would lose (4.00) from holding Optimism or give up 1.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Staked Ether vs. Optimism
Performance |
| Timeline |
| Staked Ether |
| Optimism |
Staked Ether and Optimism Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Staked Ether and Optimism
The main advantage of trading using opposite Staked Ether and Optimism positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Staked Ether position performs unexpectedly, Optimism 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 Optimism will offset losses from the drop in Optimism's long position.The idea behind Staked Ether and Optimism 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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