Correlation Between Optimism and IQN

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

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

Diversification Opportunities for Optimism and IQN

0.69

Correlation Coefficient

Optimism  IQN

Poor diversification

The 3 months correlation between Optimism and IQN is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Optimism and IQN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQN 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 IQN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQN has no effect on the direction of Optimism i.e., Optimism and IQN go up and down completely randomly.

Pair Corralation between Optimism and IQN

Assuming the 90 days horizon Optimism is expected to under-perform the IQN. In addition to that, Optimism is 1.87 times more volatile than IQN. It trades about -0.19 of its total potential returns per unit of risk. IQN is currently generating about -0.03 per unit of volatility. If you would invest  28.00  in IQN on December 29, 2024 and sell it today you would lose (2.00) from holding IQN or give up 7.14% of portfolio value over 90 days.

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

Optimism  vs.  IQN

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.

IQN

Risk-Adjusted Performance

Very Weak

Over the last 90 days IQN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IQN is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Optimism and IQN

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

The idea behind Optimism and IQN 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.