Correlation Between Polygon and Ethereum
Can any of the company-specific risk be diversified away by investing in both Polygon and Ethereum 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 Polygon and Ethereum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Polygon and Ethereum, you can compare the effects of market volatilities on Polygon and Ethereum 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 Polygon with a short position of Ethereum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polygon and Ethereum.
Diversification Opportunities for Polygon and Ethereum
Poor diversification
The 3 months correlation between Polygon and Ethereum is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Polygon and Ethereum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethereum and Polygon 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 Polygon are associated (or correlated) with Ethereum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethereum has no effect on the direction of Polygon i.e., Polygon and Ethereum go up and down completely randomly.
Pair Corralation between Polygon and Ethereum
Assuming the 90 days trading horizon Polygon is expected to under-perform the Ethereum. In addition to that, Polygon is 1.44 times more volatile than Ethereum. It trades about -0.3 of its total potential returns per unit of risk. Ethereum is currently generating about -0.14 per unit of volatility. If you would invest 349,208 in Ethereum on January 20, 2024 and sell it today you would lose (42,376) from holding Ethereum or give up 12.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Polygon vs. Ethereum
Performance |
| Timeline |
| Polygon |
| Ethereum |
Polygon and Ethereum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Polygon and Ethereum
The main advantage of trading using opposite Polygon and Ethereum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polygon position performs unexpectedly, Ethereum 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 Ethereum will offset losses from the drop in Ethereum's long position.The idea behind Polygon and Ethereum 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |