Correlation Between Optimism and Graph

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

By analyzing existing cross correlation between Optimism and The Graph, you can compare the effects of market volatilities on Optimism and Graph 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 Graph. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optimism and Graph.

Diversification Opportunities for Optimism and Graph

0.99

Correlation Coefficient

Optimism  Graph

No risk reduction

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

Pair Corralation between Optimism and Graph

Assuming the 90 days horizon Optimism is expected to under-perform the Graph. But the crypto coin apears to be less risky and, when comparing its historical volatility, Optimism is 1.16 times less risky than Graph. The crypto coin trades about -0.21 of its potential returns per unit of risk. The The Graph is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  20.00  in The Graph on December 30, 2024 and sell it today you would lose (11.17) from holding The Graph or give up 55.85% of portfolio value over 90 days.

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

Optimism  vs.  The Graph

Optimism

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optimism has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Optimism shareholders.

Graph

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Graph has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for The Graph shareholders.

Pair Trading with Optimism and Graph

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

The idea behind Optimism and The Graph 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.