Correlation Between Palomar Holdings and Sound Point
Can any of the company-specific risk be diversified away by investing in both Palomar Holdings and Sound Point 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 Sound Point into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palomar Holdings and Sound Point Meridian, you can compare the effects of market volatilities on Palomar Holdings and Sound Point 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 Sound Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palomar Holdings and Sound Point.
Diversification Opportunities for Palomar Holdings and Sound Point
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Palomar and Sound is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and Sound Point Meridian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Point Meridian 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 Sound Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Point Meridian has no effect on the direction of Palomar Holdings i.e., Palomar Holdings and Sound Point go up and down completely randomly.
Pair Corralation between Palomar Holdings and Sound Point
Given the investment horizon of 90 days Palomar Holdings is expected to generate 1.62 times more return on investment than Sound Point. However, Palomar Holdings is 1.62 times more volatile than Sound Point Meridian. It trades about 0.12 of its potential returns per unit of risk. Sound Point Meridian is currently generating about 0.07 per unit of risk. If you would invest 9,286 in Palomar Holdings on September 12, 2024 and sell it today you would earn a total of 1,515 from holding Palomar Holdings or generate 16.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Palomar Holdings vs. Sound Point Meridian
Performance |
| Timeline |
| Palomar Holdings |
| Sound Point Meridian |
Palomar Holdings and Sound Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Palomar Holdings and Sound Point
The main advantage of trading using opposite Palomar Holdings and Sound Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palomar Holdings position performs unexpectedly, Sound Point 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 Sound Point will offset losses from the drop in Sound Point's long position.| Palomar Holdings vs. Progressive Corp | Palomar Holdings vs. Chubb | Palomar Holdings vs. Cincinnati Financial | Palomar Holdings vs. W R Berkley |
| Sound Point vs. ServiceNow | Sound Point vs. Sapiens International | Sound Point vs. Amkor Technology | Sound Point vs. Joint Stock |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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