Correlation Between Polkadot and Polygon Ecosystem

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

By analyzing existing cross correlation between Polkadot and Polygon Ecosystem Token, you can compare the effects of market volatilities on Polkadot and Polygon Ecosystem 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 Polkadot with a short position of Polygon Ecosystem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polkadot and Polygon Ecosystem.

Diversification Opportunities for Polkadot and Polygon Ecosystem

0.92

Correlation Coefficient

Polkadot  Polygon Ecosystem

Almost no diversification

The 3 months correlation between Polkadot and Polygon is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Polkadot and Polygon Ecosystem Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polygon Ecosystem Token and Polkadot 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 Polkadot are associated (or correlated) with Polygon Ecosystem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polygon Ecosystem Token has no effect on the direction of Polkadot i.e., Polkadot and Polygon Ecosystem go up and down completely randomly.

Pair Corralation between Polkadot and Polygon Ecosystem

Assuming the 90 days trading horizon Polkadot is expected to generate 1.03 times more return on investment than Polygon Ecosystem. However, Polkadot is 1.03 times more volatile than Polygon Ecosystem Token. It trades about -0.05 of its potential returns per unit of risk. Polygon Ecosystem Token is currently generating about -0.06 per unit of risk. If you would invest  728.00  in Polkadot on March 2, 2024 and sell it today you would lose (30.00) from holding Polkadot or give up 4.12% of portfolio value over 90 days.

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

Polkadot  vs.  Polygon Ecosystem Token

Polkadot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polkadot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for Polkadot shareholders.

Polygon Ecosystem Token

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polygon Ecosystem Token has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's essential indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for Polygon Ecosystem Token shareholders.

Pair Trading with Polkadot and Polygon Ecosystem

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

The idea behind Polkadot and Polygon Ecosystem 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.