Correlation Between Graph and Polygon

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

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

Diversification Opportunities for Graph and Polygon

0.73

Correlation Coefficient

Graph  Polygon

Poor diversification

The 3 months correlation between Graph and Polygon is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Graph and Polygon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polygon and Graph 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 The Graph are associated (or correlated) with Polygon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polygon has no effect on the direction of Graph i.e., Graph and Polygon go up and down completely randomly.

Pair Corralation between Graph and Polygon

Assuming the 90 days trading horizon The Graph is expected to generate 1.13 times more return on investment than Polygon. However, Graph is 1.13 times more volatile than Polygon. It trades about 0.18 of its potential returns per unit of risk. Polygon is currently generating about 0.12 per unit of risk. If you would invest  15.00  in The Graph on August 30, 2024 and sell it today you would earn a total of  11.00  from holding The Graph or generate 73.33% return on investment over 90 days.

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

The Graph  vs.  Polygon

Graph

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Graph are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Graph exhibited solid returns over the last few months and may actually be approaching a breakup point.

Polygon

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polygon are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Polygon exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Graph and Polygon

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

The idea behind The Graph and Polygon 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.