Finding Correlation Arbitrage on Polymarket

What is correlation arbitrage?

Correlation arbitrage exploits the fact that mutually exclusive events should have probabilities that sum to 1 or less. On Polymarket, you often see P(A) + P(B) > 1 for markets that cannot both resolve yes.

A real example

Consider two markets: "Republican wins 2024" at 58% and "Trump wins 2024" at 62%. Since Trump winning implies a Republican win, the second market should be priced at or below the first. The 4% gap is pure arbitrage.

How Sharpe.Markets detects it

Our Edge Scanner continuously monitors all market pairs for logical inconsistencies. When it finds a violation above a configurable threshold, it fires an alert with the exact edge percentage and recommended positions.

Fee awareness

We factor in the 2026 Polymarket fee schedule, including maker rebates, so you only see edges that are profitable after fees. Many "arbitrages" disappear once fees are included.

Getting started

Enable the Edge Scanner in your Pro or Analyst plan, set your minimum edge threshold, and wait for alerts.