Correlation Between Polygon and USD Coin
Can any of the company-specific risk be diversified away by investing in both Polygon and USD Coin 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 USD Coin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Polygon and USD Coin, you can compare the effects of market volatilities on Polygon and USD Coin 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 USD Coin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polygon and USD Coin.
Diversification Opportunities for Polygon and USD Coin
Pay attention - limited upside
The 3 months correlation between Polygon and USD is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Polygon and USD Coin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USD Coin 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 USD Coin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USD Coin has no effect on the direction of Polygon i.e., Polygon and USD Coin go up and down completely randomly.
Pair Corralation between Polygon and USD Coin
Assuming the 90 days trading horizon Polygon is expected to generate 31.28 times more return on investment than USD Coin. However, Polygon is 31.28 times more volatile than USD Coin. It trades about 0.02 of its potential returns per unit of risk. USD Coin is currently generating about 0.0 per unit of risk. If you would invest 106.00 in Polygon on January 24, 2024 and sell it today you would lose (33.00) from holding Polygon or give up 31.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Polygon vs. USD Coin
Performance |
| Timeline |
| Polygon |
| USD Coin |
Polygon and USD Coin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Polygon and USD Coin
The main advantage of trading using opposite Polygon and USD Coin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polygon position performs unexpectedly, USD Coin 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 USD Coin will offset losses from the drop in USD Coin's long position.The idea behind Polygon and USD Coin 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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