Correlation Between ARCA Oil and Palomar Holdings
Can any of the company-specific risk be diversified away by investing in both ARCA Oil and Palomar Holdings 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 ARCA Oil and Palomar Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARCA Oil and Palomar Holdings, you can compare the effects of market volatilities on ARCA Oil and Palomar Holdings 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 ARCA Oil with a short position of Palomar Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARCA Oil and Palomar Holdings.
Diversification Opportunities for ARCA Oil and Palomar Holdings
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between ARCA and Palomar is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding ARCA Oil and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings and ARCA Oil 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 ARCA Oil are associated (or correlated) with Palomar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palomar Holdings has no effect on the direction of ARCA Oil i.e., ARCA Oil and Palomar Holdings go up and down completely randomly.
Pair Corralation between ARCA Oil and Palomar Holdings
Assuming the 90 days trading horizon ARCA Oil is expected to generate 0.41 times more return on investment than Palomar Holdings. However, ARCA Oil is 2.43 times less risky than Palomar Holdings. It trades about 0.92 of its potential returns per unit of risk. Palomar Holdings is currently generating about 0.19 per unit of risk. If you would invest 169,177 in ARCA Oil on October 20, 2024 and sell it today you would earn a total of 22,815 from holding ARCA Oil or generate 13.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARCA Oil vs. Palomar Holdings
Performance |
| Timeline |
ARCA Oil and Palomar Holdings Volatility Contrast
Predicted Return Density |
| Returns |
ARCA Oil
Pair trading matchups for ARCA Oil
Palomar Holdings
Pair trading matchups for Palomar Holdings
Pair Trading with ARCA Oil and Palomar Holdings
The main advantage of trading using opposite ARCA Oil and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARCA Oil position performs unexpectedly, Palomar Holdings 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 Palomar Holdings will offset losses from the drop in Palomar Holdings' long position.| ARCA Oil vs. Tapestry | ARCA Oil vs. American Clean Resources | ARCA Oil vs. CVW CleanTech | ARCA Oil vs. China Clean Energy |
| Palomar Holdings vs. Horace Mann Educators | Palomar Holdings vs. Kemper | Palomar Holdings vs. RLI Corp | Palomar Holdings vs. Global Indemnity PLC |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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