Correlation Between Polygon and IOTA

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

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

Diversification Opportunities for Polygon and IOTA

0.9

Correlation Coefficient

Polygon  IOTA

Almost no diversification

The 3 months correlation between Polygon and IOTA is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Polygon and IOTA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IOTA 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 IOTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IOTA has no effect on the direction of Polygon i.e., Polygon and IOTA go up and down completely randomly.

Pair Corralation between Polygon and IOTA

Assuming the 90 days trading horizon Polygon is expected to generate 1.93 times less return on investment than IOTA. But when comparing it to its historical volatility, Polygon is 1.05 times less risky than IOTA. It trades about 0.01 of its potential returns per unit of risk. IOTA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  25.00  in IOTA on January 19, 2024 and sell it today you would lose (3.00) from holding IOTA or give up 12.0% of portfolio value over 90 days.

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

Polygon  vs.  IOTA

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 latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Polygon shareholders.

IOTA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IOTA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, IOTA may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Polygon and IOTA

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

The idea behind Polygon and IOTA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.