Correlation Between 0x and OKB
Can any of the company-specific risk be diversified away by investing in both 0x and OKB 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 0x and OKB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 0x and OKB, you can compare the effects of market volatilities on 0x and OKB 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 0x with a short position of OKB. Check out your portfolio center. Please also check ongoing floating volatility patterns of 0x and OKB.
Diversification Opportunities for 0x and OKB
Very poor diversification
The 3 months correlation between 0x and OKB is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding 0x and OKB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OKB and 0x 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 0x are associated (or correlated) with OKB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OKB has no effect on the direction of 0x i.e., 0x and OKB go up and down completely randomly.
Pair Corralation between 0x and OKB
Assuming the 90 days trading horizon 0x is expected to generate 2.85 times more return on investment than OKB. However, 0x is 2.85 times more volatile than OKB. It trades about 0.1 of its potential returns per unit of risk. OKB is currently generating about 0.06 per unit of risk. If you would invest 24.00 in 0x on January 20, 2024 and sell it today you would earn a total of 26.00 from holding 0x or generate 108.33% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
0x vs. OKB
Performance |
Timeline |
0x |
OKB |
0x and OKB Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with 0x and OKB
The main advantage of trading using opposite 0x and OKB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 0x position performs unexpectedly, OKB 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 OKB will offset losses from the drop in OKB's long position.The idea behind 0x and OKB 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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