Correlation Between DigiByte and Polygon

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

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

Diversification Opportunities for DigiByte and Polygon

0.53

Correlation Coefficient

DigiByte  Polygon

Very weak diversification

The 3 months correlation between DigiByte and Polygon is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding DigiByte and Polygon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polygon and DigiByte 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 DigiByte 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 DigiByte i.e., DigiByte and Polygon go up and down completely randomly.

Pair Corralation between DigiByte and Polygon

Assuming the 90 days trading horizon DigiByte is expected to generate 0.95 times more return on investment than Polygon. However, DigiByte is 1.05 times less risky than Polygon. It trades about 0.12 of its potential returns per unit of risk. Polygon is currently generating about 0.05 per unit of risk. If you would invest  0.71  in DigiByte on January 25, 2024 and sell it today you would earn a total of  0.61  from holding DigiByte or generate 84.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.22%
Values	Daily Returns

DigiByte  vs.  Polygon

DigiByte

Risk-Adjusted Performance

13 of 100

Good

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

Polygon

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Polygon are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Polygon is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DigiByte and Polygon

The main advantage of trading using opposite DigiByte and Polygon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DigiByte 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 DigiByte 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..