Correlation Between Polygon and Lisk

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Can any of the company-specific risk be diversified away by investing in both Polygon and Lisk 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 Lisk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Polygon and Lisk, you can compare the effects of market volatilities on Polygon and Lisk 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 Lisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polygon and Lisk.

Diversification Opportunities for Polygon and Lisk

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Polygon and Lisk is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Polygon and Lisk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lisk 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 Lisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lisk has no effect on the direction of Polygon i.e., Polygon and Lisk go up and down completely randomly.

Pair Corralation between Polygon and Lisk

Assuming the 90 days trading horizon Polygon is expected to generate 1.79 times less return on investment than Lisk. But when comparing it to its historical volatility, Polygon is 1.17 times less risky than Lisk. It trades about 0.03 of its potential returns per unit of risk. Lisk is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Lisk on December 29, 2023 and sell it today you would earn a total of  79.00  from holding Lisk or generate 67.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Polygon  vs.  Lisk

 Performance 
       Timeline  
Polygon 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Polygon are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Polygon may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Lisk 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Lisk are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, Lisk exhibited solid returns over the last few months and may actually be approaching a breakup point.

Polygon and Lisk Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Polygon and Lisk

The main advantage of trading using opposite Polygon and Lisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polygon position performs unexpectedly, Lisk 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 Lisk will offset losses from the drop in Lisk's long position.
The idea behind Polygon and Lisk 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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