Correlation Between Chainlink and Optimism

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Can any of the company-specific risk be diversified away by investing in both Chainlink and Optimism 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 Chainlink and Optimism into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chainlink and Optimism, you can compare the effects of market volatilities on Chainlink and Optimism 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 Chainlink with a short position of Optimism. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chainlink and Optimism.

Diversification Opportunities for Chainlink and Optimism

0.69
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Chainlink and Optimism

Assuming the 90 days trading horizon Chainlink is expected to generate 0.57 times more return on investment than Optimism. However, Chainlink is 1.75 times less risky than Optimism. It trades about 0.32 of its potential returns per unit of risk. Optimism is currently generating about 0.07 per unit of risk. If you would invest  656.00  in Chainlink on June 29, 2022 and sell it today you would earn a total of  151.00  from holding Chainlink or generate 23.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Chainlink  vs.  Optimism

 Performance (%) 
       Timeline  
Chainlink 
Chainlink Performance
0 of 100
Over the last 90 days Chainlink has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Chainlink sustained solid returns over the last few months and may actually be approaching a breakup point.
Optimism 
Optimism Performance
0 of 100
Over the last 90 days Optimism has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Optimism sustained solid returns over the last few months and may actually be approaching a breakup point.

Chainlink and Optimism Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chainlink and Optimism

The main advantage of trading using opposite Chainlink and Optimism positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink position performs unexpectedly, Optimism 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 Optimism will offset losses from the drop in Optimism's long position.
The idea behind Chainlink and Optimism 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.
Check out your portfolio center. 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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