Correlation Between Palo Alto and GB Group
Can any of the company-specific risk be diversified away by investing in both Palo Alto and GB Group 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 Palo Alto and GB Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palo Alto Networks and GB Group plc, you can compare the effects of market volatilities on Palo Alto and GB Group 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 Palo Alto with a short position of GB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palo Alto and GB Group.
Diversification Opportunities for Palo Alto and GB Group
Poor diversification
The 3 months correlation between Palo and 0GB is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Palo Alto Networks and GB Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GB Group plc and Palo Alto 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 Palo Alto Networks are associated (or correlated) with GB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GB Group plc has no effect on the direction of Palo Alto i.e., Palo Alto and GB Group go up and down completely randomly.
Pair Corralation between Palo Alto and GB Group
Assuming the 90 days horizon Palo Alto Networks is expected to generate 1.26 times more return on investment than GB Group. However, Palo Alto is 1.26 times more volatile than GB Group plc. It trades about -0.11 of its potential returns per unit of risk. GB Group plc is currently generating about -0.33 per unit of risk. If you would invest 18,400 in Palo Alto Networks on October 9, 2024 and sell it today you would lose (652.00) from holding Palo Alto Networks or give up 3.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Palo Alto Networks vs. GB Group plc
Performance |
| Timeline |
| Palo Alto Networks |
| GB Group plc |
Palo Alto and GB Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Palo Alto and GB Group
The main advantage of trading using opposite Palo Alto and GB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palo Alto position performs unexpectedly, GB Group 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 GB Group will offset losses from the drop in GB Group's long position.| Palo Alto vs. ARROW ELECTRONICS | Palo Alto vs. STMICROELECTRONICS | Palo Alto vs. TT Electronics PLC | Palo Alto vs. Charter Communications |
| GB Group vs. Inspire Medical Systems | GB Group vs. SCANDMEDICAL SOLDK 040 | GB Group vs. CompuGroup Medical SE | GB Group vs. 24SEVENOFFICE GROUP AB |
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 the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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