Correlation Between Optimism and XY Oracle

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

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

Diversification Opportunities for Optimism and XY Oracle

0.76

Correlation Coefficient

Optimism  XY Oracle

Poor diversification

The 3 months correlation between Optimism and XYO is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Optimism and XY Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XY Oracle 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 XY Oracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XY Oracle has no effect on the direction of Optimism i.e., Optimism and XY Oracle go up and down completely randomly.

Pair Corralation between Optimism and XY Oracle

Assuming the 90 days horizon Optimism is expected to under-perform the XY Oracle. But the crypto coin apears to be less risky and, when comparing its historical volatility, Optimism is 1.6 times less risky than XY Oracle. The crypto coin trades about -0.22 of its potential returns per unit of risk. The XY Oracle is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1.90  in XY Oracle on December 29, 2024 and sell it today you would lose (0.91) from holding XY Oracle or give up 47.74% of portfolio value over 90 days.

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

Optimism  vs.  XY Oracle

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.

XY Oracle

Risk-Adjusted Performance

Very Weak

Over the last 90 days XY Oracle 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 XY Oracle shareholders.

Pair Trading with Optimism and XY Oracle

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

The idea behind Optimism and XY Oracle 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.