Correlation Between OLT and SPACE

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

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

Diversification Opportunities for OLT and SPACE

0.05

Correlation Coefficient

OLT  SPACE

Significant diversification

The 3 months correlation between OLT and SPACE is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding OLT and SPACE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPACE and OLT 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 OLT are associated (or correlated) with SPACE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPACE has no effect on the direction of OLT i.e., OLT and SPACE go up and down completely randomly.

Pair Corralation between OLT and SPACE

Assuming the 90 days trading horizon OLT is expected to generate 1.83 times more return on investment than SPACE. However, OLT is 1.83 times more volatile than SPACE. It trades about -0.07 of its potential returns per unit of risk. SPACE is currently generating about -0.18 per unit of risk. If you would invest  0.35  in OLT on January 29, 2024 and sell it today you would lose (0.09) from holding OLT or give up 27.12% of portfolio value over 90 days.

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

OLT  vs.  SPACE

OLT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OLT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for OLT shareholders.

SPACE

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OLT and SPACE

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

The idea behind OLT and SPACE 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 the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.