# Correlation Between Polygon and Alpha Finance

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

## Diversification Opportunities for Polygon and Alpha Finance

0.64 | Correlation Coefficient |

### Poor diversification

The 3 months correlation between Polygon and Alpha is

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

Assuming the 90 days trading horizon Polygon is expected to generate 0.96 times more return on investment than Alpha Finance. However, Polygon is 1.04 times less risky than Alpha Finance. It trades about 0.0 of its potential returns per unit of risk. Alpha Finance Lab is currently generating about -0.08 per unit of risk. If you would invest

**151.00**in Polygon on**July 9, 2022**and sell it today you would**lose (68.00)**from holding Polygon or give up**45.03%**of portfolio value over**90**days.Time Period | 3 Months [change] |

Direction | Moves Together |

Strength | Significant |

Accuracy | 100.0% |

Values | Daily Returns |

## Polygon vs. Alpha Finance Lab

Performance (%) |

Timeline |

Polygon |

Alpha Finance Lab |

## Polygon and Alpha Finance Volatility Contrast

Predicted Return Density |

Returns |

## Pair Trading with Polygon and Alpha Finance

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

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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