Correlation Between Stellar and Polygon

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

Diversification Opportunities for Stellar and Polygon

0.11
  Correlation Coefficient

Average diversification

The 3 months correlation between Stellar and Polygon is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Polygon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polygon and Stellar 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 Stellar 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 Stellar i.e., Stellar and Polygon go up and down completely randomly.

Pair Corralation between Stellar and Polygon

Assuming the 90 days trading horizon Stellar is expected to generate 5.32 times less return on investment than Polygon. But when comparing it to its historical volatility, Stellar is 1.85 times less risky than Polygon. It trades about 0.1 of its potential returns per unit of risk. Polygon is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Polygon on May 16, 2022 and sell it today you would earn a total of  64.00  from holding Polygon or generate 168.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Stellar  vs.  Polygon

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

Stellar Price Channel

Polygon 
Polygon Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Polygon are ranked lower than 7 (%) 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

Stellar and Polygon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Stellar and Polygon

The main advantage of trading using opposite Stellar and Polygon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar 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 Stellar 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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