Correlation Between Optimism and SPX6900

Can any of the company-specific risk be diversified away by investing in both Optimism and SPX6900 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 SPX6900 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Optimism and SPX6900, you can compare the effects of market volatilities on Optimism and SPX6900 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 SPX6900. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optimism and SPX6900.

Diversification Opportunities for Optimism and SPX6900

-0.32

Correlation Coefficient

Optimism  SPX6900

Very good diversification

The 3 months correlation between Optimism and SPX6900 is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Optimism and SPX6900 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPX6900 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 SPX6900. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPX6900 has no effect on the direction of Optimism i.e., Optimism and SPX6900 go up and down completely randomly.

Pair Corralation between Optimism and SPX6900

Assuming the 90 days horizon Optimism is expected to generate 12.35 times less return on investment than SPX6900. But when comparing it to its historical volatility, Optimism is 1.52 times less risky than SPX6900. It trades about 0.03 of its potential returns per unit of risk. SPX6900 is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  59.00  in SPX6900 on April 24, 2025 and sell it today you would earn a total of  139.00  from holding SPX6900 or generate 235.59% return on investment over 90 days.

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

Optimism  vs.  SPX6900

Optimism

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Optimism are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Optimism may actually be approaching a critical reversion point that can send shares even higher in August 2025.

SPX6900

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPX6900 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, SPX6900 exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Optimism and SPX6900

The main advantage of trading using opposite Optimism and SPX6900 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimism position performs unexpectedly, SPX6900 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 SPX6900 will offset losses from the drop in SPX6900's long position.

The idea behind Optimism and SPX6900 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.