Correlation Between Polygon and Quant

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

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

Diversification Opportunities for Polygon and Quant

0.72

Correlation Coefficient

Polygon  Quant

Poor diversification

The 3 months correlation between Polygon and Quant is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Polygon and Quant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quant 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 Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quant has no effect on the direction of Polygon i.e., Polygon and Quant go up and down completely randomly.

Pair Corralation between Polygon and Quant

Assuming the 90 days trading horizon Polygon is expected to generate 1.48 times less return on investment than Quant. In addition to that, Polygon is 1.21 times more volatile than Quant. It trades about 0.02 of its total potential returns per unit of risk. Quant is currently generating about 0.03 per unit of volatility. If you would invest  8,709  in Quant on January 26, 2024 and sell it today you would earn a total of  2,076  from holding Quant or generate 23.84% return on investment over 90 days.

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

Polygon  vs.  Quant

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.

Quant

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Polygon and Quant

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

The idea behind Polygon and Quant 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.