Correlation Between Polygon and Cronos

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

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

Diversification Opportunities for Polygon and Cronos

0.6

Correlation Coefficient

Polygon  Cronos

Poor diversification

The 3 months correlation between Polygon and Cronos is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Polygon and Cronos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos and Polygon 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 Polygon are associated (or correlated) with Cronos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cronos has no effect on the direction of Polygon i.e., Polygon and Cronos go up and down completely randomly.

Pair Corralation between Polygon and Cronos

Assuming the 90 days trading horizon Polygon is expected to under-perform the Cronos. But the crypto coin apears to be less risky and, when comparing its historical volatility, Polygon is 1.15 times less risky than Cronos. The crypto coin trades about -0.14 of its potential returns per unit of risk. The Cronos is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  9.13  in Cronos on January 20, 2024 and sell it today you would earn a total of  2.87  from holding Cronos or generate 31.43% return on investment over 90 days.

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

Polygon  vs.  Cronos

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.

Cronos

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cronos are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cronos exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polygon and Cronos

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

The idea behind Polygon and Cronos 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..