Correlation Between Polygon and VeChain

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

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

Diversification Opportunities for Polygon and VeChain

0.58

Correlation Coefficient

Polygon  VeChain

Very weak diversification

The 3 months correlation between Polygon and VeChain is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Polygon and VeChain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeChain 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 VeChain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeChain has no effect on the direction of Polygon i.e., Polygon and VeChain go up and down completely randomly.

Pair Corralation between Polygon and VeChain

Assuming the 90 days trading horizon Polygon is expected to under-perform the VeChain. In addition to that, Polygon is 1.26 times more volatile than VeChain. It trades about -0.1 of its total potential returns per unit of risk. VeChain is currently generating about -0.05 per unit of volatility. If you would invest  4.03  in VeChain on February 4, 2024 and sell it today you would lose (0.30) from holding VeChain or give up 7.44% of portfolio value over 90 days.

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

Polygon  vs.  VeChain

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.

VeChain

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Polygon and VeChain

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

The idea behind Polygon and VeChain 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.