Correlation Between Optimism and Polkadot

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

Diversification Opportunities for Optimism and Polkadot

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Optimism and Polkadot is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Optimism and Polkadot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polkadot 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 Polkadot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polkadot has no effect on the direction of Optimism i.e., Optimism and Polkadot go up and down completely randomly.

Pair Corralation between Optimism and Polkadot

Assuming the 90 days horizon Optimism is expected to under-perform the Polkadot. In addition to that, Optimism is 1.85 times more volatile than Polkadot. It trades about -0.09 of its total potential returns per unit of risk. Polkadot is currently generating about -0.09 per unit of volatility. If you would invest  687.00  in Polkadot on July 6, 2022 and sell it today you would lose (60.00)  from holding Polkadot or give up 8.73% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Optimism  vs.  Polkadot

 Performance (%) 
       Timeline  
Optimism 
Optimism Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Optimism are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Optimism sustained solid returns over the last few months and may actually be approaching a breakup point.

Optimism Price Channel

Polkadot 
Polkadot Performance
0 of 100
Over the last 90 days Polkadot has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Crypto's basic indicators remain somewhat strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for Polkadot investors.

Polkadot Price Channel

Optimism and Polkadot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Optimism and Polkadot

The main advantage of trading using opposite Optimism and Polkadot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimism position performs unexpectedly, Polkadot 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 Polkadot will offset losses from the drop in Polkadot's long position.
Optimism vs. XRP
Optimism vs. Solana
Optimism vs. Polkadot
Optimism vs. Chainlink
The idea behind Optimism and Polkadot 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.
Polkadot vs. XRP
Polkadot vs. Solana
Polkadot vs. Chainlink
Polkadot vs. Polygon
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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