Correlation Between Palomar Holdings and Employers Holdings
Can any of the company-specific risk be diversified away by investing in both Palomar Holdings and Employers Holdings 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 Employers Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palomar Holdings and Employers Holdings, you can compare the effects of market volatilities on Palomar Holdings and Employers Holdings 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 Employers Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palomar Holdings and Employers Holdings.
Diversification Opportunities for Palomar Holdings and Employers Holdings
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Palomar and Employers is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and Employers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Employers Holdings 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 Employers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Employers Holdings has no effect on the direction of Palomar Holdings i.e., Palomar Holdings and Employers Holdings go up and down completely randomly.
Pair Corralation between Palomar Holdings and Employers Holdings
Given the investment horizon of 90 days Palomar Holdings is expected to generate 1.79 times more return on investment than Employers Holdings. However, Palomar Holdings is 1.79 times more volatile than Employers Holdings. It trades about 0.13 of its potential returns per unit of risk. Employers Holdings is currently generating about 0.1 per unit of risk. If you would invest 5,987 in Palomar Holdings on August 28, 2024 and sell it today you would earn a total of 4,916 from holding Palomar Holdings or generate 82.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Palomar Holdings vs. Employers Holdings
Performance |
| Timeline |
| Palomar Holdings |
| Employers Holdings |
Palomar Holdings and Employers Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Palomar Holdings and Employers Holdings
The main advantage of trading using opposite Palomar Holdings and Employers Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palomar Holdings position performs unexpectedly, Employers Holdings 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 Employers Holdings will offset losses from the drop in Employers Holdings' long position.| Palomar Holdings vs. Horace Mann Educators | Palomar Holdings vs. Kemper | Palomar Holdings vs. RLI Corp | Palomar Holdings vs. Global Indemnity PLC |
| Employers Holdings vs. ICC Holdings | Employers Holdings vs. AMERISAFE | Employers Holdings vs. NMI Holdings | Employers Holdings vs. Investors Title |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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