Correlation Between Chainlink and Polygon

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

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

Diversification Opportunities for Chainlink and Polygon

0.84

Correlation Coefficient

Chainlink  Polygon

Very poor diversification

The 3 months correlation between Chainlink and Polygon is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Polygon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polygon and Chainlink 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 Chainlink 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 Chainlink i.e., Chainlink and Polygon go up and down completely randomly.

Pair Corralation between Chainlink and Polygon

Assuming the 90 days trading horizon Chainlink is expected to generate 0.94 times more return on investment than Polygon. However, Chainlink is 1.06 times less risky than Polygon. It trades about -0.23 of its potential returns per unit of risk. Polygon is currently generating about -0.3 per unit of risk. If you would invest  1,845  in Chainlink on January 20, 2024 and sell it today you would lose (450.00) from holding Chainlink or give up 24.39% of portfolio value over 90 days.

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

Chainlink  vs.  Polygon

Chainlink

Risk-Adjusted Performance

1 of 100

Weak

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

Polygon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polygon has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Chainlink and Polygon

The main advantage of trading using opposite Chainlink and Polygon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink 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 Chainlink 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.