Correlation Between Visa and Polygon L
Can any of the company-specific risk be diversified away by investing in both Visa and Polygon L 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 Visa and Polygon L into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Polygon L, you can compare the effects of market volatilities on Visa and Polygon L 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 Visa with a short position of Polygon L. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Polygon L.
Diversification Opportunities for Visa and Polygon L
Weak diversification
The 3 months correlation between Visa and Polygon is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Polygon L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polygon L and Visa 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 Visa Class A are associated (or correlated) with Polygon L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polygon L has no effect on the direction of Visa i.e., Visa and Polygon L go up and down completely randomly.
Pair Corralation between Visa and Polygon L
Taking into account the 90-day investment horizon Visa is expected to generate 1.23 times less return on investment than Polygon L. But when comparing it to its historical volatility, Visa Class A is 1.63 times less risky than Polygon L. It trades about 0.06 of its potential returns per unit of risk. Polygon L is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 305,000 in Polygon L on January 26, 2024 and sell it today you would earn a total of 93,600 from holding Polygon L or generate 30.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 78.95% |
| Values | Daily Returns |
Visa Class A vs. Polygon L
Performance |
| Timeline |
| Visa Class A |
| Polygon L |
Visa and Polygon L Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Polygon L
The main advantage of trading using opposite Visa and Polygon L positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Polygon L 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 Polygon L will offset losses from the drop in Polygon L's long position.The idea behind Visa Class A and Polygon L 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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