Correlation Between Palomar Holdings and Burlington Stores
Can any of the company-specific risk be diversified away by investing in both Palomar Holdings and Burlington Stores 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 Palomar Holdings and Burlington Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palomar Holdings and Burlington Stores, you can compare the effects of market volatilities on Palomar Holdings and Burlington Stores 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 Palomar Holdings with a short position of Burlington Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palomar Holdings and Burlington Stores.
Diversification Opportunities for Palomar Holdings and Burlington Stores
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Palomar and Burlington is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and Palomar Holdings 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 Palomar Holdings are associated (or correlated) with Burlington Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burlington Stores has no effect on the direction of Palomar Holdings i.e., Palomar Holdings and Burlington Stores go up and down completely randomly.
Pair Corralation between Palomar Holdings and Burlington Stores
Given the investment horizon of 90 days Palomar Holdings is expected to generate 1.21 times more return on investment than Burlington Stores. However, Palomar Holdings is 1.21 times more volatile than Burlington Stores. It trades about 0.12 of its potential returns per unit of risk. Burlington Stores is currently generating about 0.08 per unit of risk. If you would invest 7,816 in Palomar Holdings on September 19, 2024 and sell it today you would earn a total of 2,658 from holding Palomar Holdings or generate 34.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Palomar Holdings vs. Burlington Stores
Performance |
| Timeline |
| Palomar Holdings |
| Burlington Stores |
Palomar Holdings and Burlington Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Palomar Holdings and Burlington Stores
The main advantage of trading using opposite Palomar Holdings and Burlington Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palomar Holdings position performs unexpectedly, Burlington Stores 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 Burlington Stores will offset losses from the drop in Burlington Stores' long position.The idea behind Palomar Holdings and Burlington Stores 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.| Burlington Stores vs. Capri Holdings | Burlington Stores vs. Movado Group | Burlington Stores vs. Tapestry | Burlington Stores vs. Brilliant Earth Group |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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