Correlation Between Palomar Holdings and MORGAN

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

Diversification Opportunities for Palomar Holdings and MORGAN

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between Palomar and MORGAN is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and MORGAN STANLEY MTN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MORGAN STANLEY MTN 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 MORGAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MORGAN STANLEY MTN has no effect on the direction of Palomar Holdings i.e., Palomar Holdings and MORGAN go up and down completely randomly.

Pair Corralation between Palomar Holdings and MORGAN

Given the investment horizon of 90 days Palomar Holdings is expected to generate 2.03 times more return on investment than MORGAN. However, Palomar Holdings is 2.03 times more volatile than MORGAN STANLEY MTN. It trades about 0.11 of its potential returns per unit of risk. MORGAN STANLEY MTN is currently generating about -0.05 per unit of risk. If you would invest  5,973  in Palomar Holdings on November 4, 2024 and sell it today you would earn a total of  4,814  from holding Palomar Holdings or generate 80.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy97.17%
ValuesDaily Returns

Palomar Holdings  vs.  MORGAN STANLEY MTN

 Performance 
       Timeline  
Palomar Holdings 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 12 (%) 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.
MORGAN STANLEY MTN 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MORGAN STANLEY MTN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for MORGAN STANLEY MTN investors.

Palomar Holdings and MORGAN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Palomar Holdings and MORGAN

The main advantage of trading using opposite Palomar Holdings and MORGAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palomar Holdings position performs unexpectedly, MORGAN 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 MORGAN will offset losses from the drop in MORGAN's long position.
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The idea behind Palomar Holdings and MORGAN STANLEY MTN 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.
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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