Correlation Between LPL Financial and Palantir Technologies
Can any of the company-specific risk be diversified away by investing in both LPL Financial and Palantir Technologies 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 LPL Financial and Palantir Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LPL Financial Holdings and Palantir Technologies, you can compare the effects of market volatilities on LPL Financial and Palantir Technologies 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 LPL Financial with a short position of Palantir Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPL Financial and Palantir Technologies.
Diversification Opportunities for LPL Financial and Palantir Technologies
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between LPL and Palantir is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding LPL Financial Holdings and Palantir Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palantir Technologies and LPL Financial 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 LPL Financial Holdings are associated (or correlated) with Palantir Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palantir Technologies has no effect on the direction of LPL Financial i.e., LPL Financial and Palantir Technologies go up and down completely randomly.
Pair Corralation between LPL Financial and Palantir Technologies
Assuming the 90 days trading horizon LPL Financial is expected to generate 3.23 times less return on investment than Palantir Technologies. But when comparing it to its historical volatility, LPL Financial Holdings is 2.91 times less risky than Palantir Technologies. It trades about 0.14 of its potential returns per unit of risk. Palantir Technologies is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 15,325 in Palantir Technologies on November 6, 2024 and sell it today you would earn a total of 1,775 from holding Palantir Technologies or generate 11.58% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
LPL Financial Holdings vs. Palantir Technologies
Performance |
Timeline |
LPL Financial Holdings |
Palantir Technologies |
LPL Financial and Palantir Technologies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LPL Financial and Palantir Technologies
The main advantage of trading using opposite LPL Financial and Palantir Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPL Financial position performs unexpectedly, Palantir Technologies 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 Palantir Technologies will offset losses from the drop in Palantir Technologies' long position.LPL Financial vs. Taiwan Semiconductor Manufacturing | LPL Financial vs. Apple Inc | LPL Financial vs. Alibaba Group Holding | LPL Financial vs. Microsoft |
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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 the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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