Correlation Between Polygon and Alpha Finance

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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

  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 Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Polygon  vs.  Alpha Finance Lab

 Performance (%) 
Polygon Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Polygon are ranked lower than 10 (%) 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

Alpha Finance Lab 
Alpha Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Finance Lab are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Alpha Finance sustained solid returns over the last few months and may actually be approaching a breakup point.

Alpha Price Channel

Polygon and Alpha Finance Volatility Contrast

   Predicted Return Density   

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.
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The idea behind Polygon and Alpha Finance Lab 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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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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