Correlation Between Polygon and Theta Network

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

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

Diversification Opportunities for Polygon and Theta Network

0.64

Correlation Coefficient

Polygon  Theta Network

Poor diversification

The 3 months correlation between Polygon and Theta is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Polygon and Theta Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Theta Network 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 Theta Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Theta Network has no effect on the direction of Polygon i.e., Polygon and Theta Network go up and down completely randomly.

Pair Corralation between Polygon and Theta Network

Assuming the 90 days trading horizon Polygon is expected to generate 112.53 times less return on investment than Theta Network. But when comparing it to its historical volatility, Polygon is 1.69 times less risky than Theta Network. It trades about 0.0 of its potential returns per unit of risk. Theta Network is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  94.00  in Theta Network on January 20, 2024 and sell it today you would earn a total of  114.00  from holding Theta Network or generate 121.28% return on investment over 90 days.

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

Polygon  vs.  Theta Network

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.

Theta Network

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Theta Network are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Theta Network exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polygon and Theta Network

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

The idea behind Polygon and Theta Network 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.