Correlation Between Palomar Holdings and Donegal Group
Can any of the company-specific risk be diversified away by investing in both Palomar Holdings and Donegal 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 Palomar Holdings and Donegal Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palomar Holdings and Donegal Group B, you can compare the effects of market volatilities on Palomar Holdings and Donegal 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 Palomar Holdings with a short position of Donegal Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palomar Holdings and Donegal Group.
Diversification Opportunities for Palomar Holdings and Donegal Group
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Palomar and Donegal is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and Donegal Group B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donegal Group B 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 Donegal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donegal Group B has no effect on the direction of Palomar Holdings i.e., Palomar Holdings and Donegal Group go up and down completely randomly.
Pair Corralation between Palomar Holdings and Donegal Group
Given the investment horizon of 90 days Palomar Holdings is expected to generate 0.65 times more return on investment than Donegal Group. However, Palomar Holdings is 1.53 times less risky than Donegal Group. It trades about 0.08 of its potential returns per unit of risk. Donegal Group B is currently generating about 0.02 per unit of risk. If you would invest 5,943 in Palomar Holdings on August 31, 2024 and sell it today you would earn a total of 4,887 from holding Palomar Holdings or generate 82.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 81.02% |
| Values | Daily Returns |
Palomar Holdings vs. Donegal Group B
Performance |
| Timeline |
| Palomar Holdings |
| Donegal Group B |
Palomar Holdings and Donegal Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Palomar Holdings and Donegal Group
The main advantage of trading using opposite Palomar Holdings and Donegal Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palomar Holdings position performs unexpectedly, Donegal 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 Donegal Group will offset losses from the drop in Donegal Group's long position.| Palomar Holdings vs. Horace Mann Educators | Palomar Holdings vs. Kemper | Palomar Holdings vs. RLI Corp | Palomar Holdings vs. Global Indemnity PLC |
| Donegal Group vs. Progressive Corp | Donegal Group vs. Chubb | Donegal Group vs. The Allstate | Donegal Group vs. CNA Financial |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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