Correlation Between Optimism and OLT

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

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

Diversification Opportunities for Optimism and OLT

0.39

Correlation Coefficient

Optimism  OLT

Weak diversification

The 3 months correlation between Optimism and OLT is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Optimism and OLT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OLT 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 OLT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OLT has no effect on the direction of Optimism i.e., Optimism and OLT go up and down completely randomly.

Pair Corralation between Optimism and OLT

Assuming the 90 days horizon Optimism is expected to under-perform the OLT. But the crypto coin apears to be less risky and, when comparing its historical volatility, Optimism is 5.22 times less risky than OLT. The crypto coin trades about -0.24 of its potential returns per unit of risk. The OLT is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.05  in OLT on December 29, 2024 and sell it today you would earn a total of  0.01  from holding OLT or generate 14.1% return on investment over 90 days.

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

Optimism  vs.  OLT

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.

OLT

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OLT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, OLT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Optimism and OLT

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

The idea behind Optimism and OLT 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.