Correlation Between Palomar Holdings and Park Electrochemical
Can any of the company-specific risk be diversified away by investing in both Palomar Holdings and Park Electrochemical 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 Park Electrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palomar Holdings and Park Electrochemical, you can compare the effects of market volatilities on Palomar Holdings and Park Electrochemical 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 Park Electrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palomar Holdings and Park Electrochemical.
Diversification Opportunities for Palomar Holdings and Park Electrochemical
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Palomar and Park is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical 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 Park Electrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Electrochemical has no effect on the direction of Palomar Holdings i.e., Palomar Holdings and Park Electrochemical go up and down completely randomly.
Pair Corralation between Palomar Holdings and Park Electrochemical
Given the investment horizon of 90 days Palomar Holdings is expected to generate 0.86 times more return on investment than Park Electrochemical. However, Palomar Holdings is 1.17 times less risky than Park Electrochemical. It trades about 0.23 of its potential returns per unit of risk. Park Electrochemical is currently generating about 0.1 per unit of risk. If you would invest 10,257 in Palomar Holdings on October 24, 2024 and sell it today you would earn a total of 703.00 from holding Palomar Holdings or generate 6.85% 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. Park Electrochemical
Performance |
| Timeline |
| Palomar Holdings |
| Park Electrochemical |
Palomar Holdings and Park Electrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Palomar Holdings and Park Electrochemical
The main advantage of trading using opposite Palomar Holdings and Park Electrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palomar Holdings position performs unexpectedly, Park Electrochemical 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 Park Electrochemical will offset losses from the drop in Park Electrochemical's long position.| Palomar Holdings vs. Horace Mann Educators | Palomar Holdings vs. Kemper | Palomar Holdings vs. RLI Corp | Palomar Holdings vs. Global Indemnity PLC |
| Park Electrochemical vs. Innovative Solutions and | Park Electrochemical vs. VSE Corporation | Park Electrochemical vs. Curtiss Wright | Park Electrochemical vs. Ducommun Incorporated |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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