Correlation Between Palomar Holdings and KVH Industries
Can any of the company-specific risk be diversified away by investing in both Palomar Holdings and KVH Industries 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 KVH Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palomar Holdings and KVH Industries, you can compare the effects of market volatilities on Palomar Holdings and KVH Industries 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 KVH Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palomar Holdings and KVH Industries.
Diversification Opportunities for Palomar Holdings and KVH Industries
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Palomar and KVH is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries 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 KVH Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KVH Industries has no effect on the direction of Palomar Holdings i.e., Palomar Holdings and KVH Industries go up and down completely randomly.
Pair Corralation between Palomar Holdings and KVH Industries
Given the investment horizon of 90 days Palomar Holdings is expected to generate 0.91 times more return on investment than KVH Industries. However, Palomar Holdings is 1.1 times less risky than KVH Industries. It trades about 0.07 of its potential returns per unit of risk. KVH Industries is currently generating about -0.03 per unit of risk. If you would invest 5,154 in Palomar Holdings on September 3, 2024 and sell it today you would earn a total of 5,749 from holding Palomar Holdings or generate 111.54% 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. KVH Industries
Performance |
| Timeline |
| Palomar Holdings |
| KVH Industries |
Palomar Holdings and KVH Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Palomar Holdings and KVH Industries
The main advantage of trading using opposite Palomar Holdings and KVH Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palomar Holdings position performs unexpectedly, KVH Industries 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 KVH Industries will offset losses from the drop in KVH Industries' long position.| Palomar Holdings vs. Horace Mann Educators | Palomar Holdings vs. Kemper | Palomar Holdings vs. RLI Corp | Palomar Holdings vs. Global Indemnity PLC |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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