Correlation Between Optimism and LEO Token

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

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

Diversification Opportunities for Optimism and LEO Token

-0.41

Correlation Coefficient

Optimism  LEO Token

Very good diversification

The 3 months correlation between Optimism and LEO is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Optimism and LEO Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEO Token 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 LEO Token. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEO Token has no effect on the direction of Optimism i.e., Optimism and LEO Token go up and down completely randomly.

Pair Corralation between Optimism and LEO Token

Assuming the 90 days horizon Optimism is expected to generate 3.65 times more return on investment than LEO Token. However, Optimism is 3.65 times more volatile than LEO Token. It trades about 0.03 of its potential returns per unit of risk. LEO Token is currently generating about 0.01 per unit of risk. If you would invest  68.00  in Optimism on May 2, 2025 and sell it today you would lose (1.00) from holding Optimism or give up 1.47% of portfolio value over 90 days.

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

Optimism  vs.  LEO Token

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.

LEO Token

Risk-Adjusted Performance

Very Weak

Over the last 90 days LEO Token has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, LEO Token is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Optimism and LEO Token

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

The idea behind Optimism and LEO Token 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.