Correlation Between Palomar Holdings and MSP Recovery
Can any of the company-specific risk be diversified away by investing in both Palomar Holdings and MSP Recovery 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 MSP Recovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palomar Holdings and MSP Recovery, you can compare the effects of market volatilities on Palomar Holdings and MSP Recovery 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 MSP Recovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palomar Holdings and MSP Recovery.
Diversification Opportunities for Palomar Holdings and MSP Recovery
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Palomar and MSP is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and MSP Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Recovery 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 MSP Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Recovery has no effect on the direction of Palomar Holdings i.e., Palomar Holdings and MSP Recovery go up and down completely randomly.
Pair Corralation between Palomar Holdings and MSP Recovery
Given the investment horizon of 90 days Palomar Holdings is expected to generate 13.13 times less return on investment than MSP Recovery. But when comparing it to its historical volatility, Palomar Holdings is 18.76 times less risky than MSP Recovery. It trades about 0.15 of its potential returns per unit of risk. MSP Recovery is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 10.00 in MSP Recovery on September 15, 2024 and sell it today you would lose (3.13) from holding MSP Recovery or give up 31.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 71.43% |
| Values | Daily Returns |
Palomar Holdings vs. MSP Recovery
Performance |
| Timeline |
| Palomar Holdings |
| MSP Recovery |
Palomar Holdings and MSP Recovery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Palomar Holdings and MSP Recovery
The main advantage of trading using opposite Palomar Holdings and MSP Recovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palomar Holdings position performs unexpectedly, MSP Recovery 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 MSP Recovery will offset losses from the drop in MSP Recovery's long position.| Palomar Holdings vs. W R Berkley | Palomar Holdings vs. Markel | Palomar Holdings vs. RLI Corp | Palomar Holdings vs. CNA Financial |
| MSP Recovery vs. Sabre Insurance Group | MSP Recovery vs. Palomar Holdings | MSP Recovery vs. Assurant | MSP Recovery vs. Aegon NV ADR |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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