Correlation Between Optimism and NPXS

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

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

Diversification Opportunities for Optimism and NPXS

-0.6

Correlation Coefficient

Optimism  NPXS

Excellent diversification

The 3 months correlation between Optimism and NPXS is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Optimism and NPXS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NPXS 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 NPXS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NPXS has no effect on the direction of Optimism i.e., Optimism and NPXS go up and down completely randomly.

Pair Corralation between Optimism and NPXS

Assuming the 90 days horizon Optimism is expected to generate 0.95 times more return on investment than NPXS. However, Optimism is 1.06 times less risky than NPXS. It trades about 0.03 of its potential returns per unit of risk. NPXS is currently generating about -0.14 per unit of risk. If you would invest  248.00  in Optimism on September 1, 2024 and sell it today you would lose (3.00) from holding Optimism or give up 1.21% of portfolio value over 90 days.

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

Optimism  vs.  NPXS

Optimism

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Optimism are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Optimism exhibited solid returns over the last few months and may actually be approaching a breakup point.

NPXS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NPXS 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 December 2024. The latest tumult may also be a sign of longer-term up-swing for NPXS shareholders.

Pair Trading with Optimism and NPXS

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

The idea behind Optimism and NPXS 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.