Correlation Between Polygon and UBEX

Can any of the company-specific risk be diversified away by investing in both Polygon and UBEX 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 UBEX into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Polygon and UBEX, you can compare the effects of market volatilities on Polygon and UBEX 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 UBEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polygon and UBEX.

Diversification Opportunities for Polygon and UBEX

0.76

Correlation Coefficient

Polygon  UBEX

Poor diversification

The 3 months correlation between Polygon and UBEX is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Polygon and UBEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBEX 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 UBEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBEX has no effect on the direction of Polygon i.e., Polygon and UBEX go up and down completely randomly.

Pair Corralation between Polygon and UBEX

Assuming the 90 days trading horizon Polygon is expected to generate 1.22 times more return on investment than UBEX. However, Polygon is 1.22 times more volatile than UBEX. It trades about 0.16 of its potential returns per unit of risk. UBEX is currently generating about 0.16 per unit of risk. If you would invest  38.00  in Polygon on September 3, 2024 and sell it today you would earn a total of  22.00  from holding Polygon or generate 57.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Polygon  vs.  UBEX

Polygon

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Polygon are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Polygon exhibited solid returns over the last few months and may actually be approaching a breakup point.

UBEX

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UBEX are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, UBEX exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polygon and UBEX

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

The idea behind Polygon and UBEX 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.