Correlation Between Polygon and Balancer

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

Diversification Opportunities for Polygon and Balancer

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Polygon and Balancer is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Polygon and Balancer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balancer 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 Balancer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balancer has no effect on the direction of Polygon i.e., Polygon and Balancer go up and down completely randomly.

Pair Corralation between Polygon and Balancer

Assuming the 90 days trading horizon Polygon is expected to generate 1.58 times more return on investment than Balancer. However, Polygon is 1.58 times more volatile than Balancer. It trades about 0.04 of its potential returns per unit of risk. Balancer is currently generating about -0.03 per unit of risk. If you would invest  87.00  in Polygon on August 30, 2022 and sell it today you would lose (2.00)  from holding Polygon or give up 2.3% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Polygon  vs.  Balancer

 Performance (%) 
       Timeline  
Polygon 
Polygon Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Polygon are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Polygon sustained solid returns over the last few months and may actually be approaching a breakup point.

Polygon Price Channel

Balancer 
Balancer Performance
0 of 100
Over the last 90 days Balancer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Balancer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Balancer Price Channel

Polygon and Balancer Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Polygon and Balancer

The main advantage of trading using opposite Polygon and Balancer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polygon position performs unexpectedly, Balancer 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 Balancer will offset losses from the drop in Balancer's long position.
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The idea behind Polygon and Balancer 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.
Balancer vs. XRP
Balancer vs. Solana
Balancer vs. Polygon
Balancer vs. Chainlink
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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