Correlation Between Palomar Holdings and Markel

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Can any of the company-specific risk be diversified away by investing in both Palomar Holdings and Markel 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 Markel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palomar Holdings and Markel, you can compare the effects of market volatilities on Palomar Holdings and Markel 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 Markel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palomar Holdings and Markel.

Diversification Opportunities for Palomar Holdings and Markel

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Palomar and Markel is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and Markel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Markel 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 Markel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Markel has no effect on the direction of Palomar Holdings i.e., Palomar Holdings and Markel go up and down completely randomly.

Pair Corralation between Palomar Holdings and Markel

Given the investment horizon of 90 days Palomar Holdings is expected to generate 1.43 times more return on investment than Markel. However, Palomar Holdings is 1.43 times more volatile than Markel. It trades about 0.19 of its potential returns per unit of risk. Markel is currently generating about 0.19 per unit of risk. If you would invest  10,381  in Palomar Holdings on October 20, 2024 and sell it today you would earn a total of  656.00  from holding Palomar Holdings or generate 6.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Palomar Holdings  vs.  Markel

 Performance 
       Timeline  
Palomar Holdings 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Palomar Holdings reported solid returns over the last few months and may actually be approaching a breakup point.
Markel 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Markel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Markel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Palomar Holdings and Markel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Palomar Holdings and Markel

The main advantage of trading using opposite Palomar Holdings and Markel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palomar Holdings position performs unexpectedly, Markel 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 Markel will offset losses from the drop in Markel's long position.
The idea behind Palomar Holdings and Markel 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.
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 Global Correlations module to find global opportunities by holding instruments from different markets.

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