Correlation Between NEXO and Polygon

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

Diversification Opportunities for NEXO and Polygon

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between NEXO and Polygon is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding NEXO and Polygon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polygon and NEXO 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 NEXO are associated (or correlated) with Polygon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polygon has no effect on the direction of NEXO i.e., NEXO and Polygon go up and down completely randomly.

Pair Corralation between NEXO and Polygon

Assuming the 90 days trading horizon NEXO is expected to generate 0.66 times more return on investment than Polygon. However, NEXO is 1.52 times less risky than Polygon. It trades about 0.1 of its potential returns per unit of risk. Polygon is currently generating about 0.01 per unit of risk. If you would invest  64.00  in NEXO on December 29, 2023 and sell it today you would earn a total of  69.00  from holding NEXO or generate 107.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

NEXO  vs.  Polygon

 Performance 
       Timeline  
NEXO 

Risk-Adjusted Performance

14 of 100

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

NEXO and Polygon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NEXO and Polygon

The main advantage of trading using opposite NEXO and Polygon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXO position performs unexpectedly, Polygon 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 Polygon will offset losses from the drop in Polygon's long position.
The idea behind NEXO and Polygon 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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