Correlation Between Palo Alto and Sabre Insurance

Can any of the company-specific risk be diversified away by investing in both Palo Alto and Sabre Insurance 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 Palo Alto and Sabre Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Palo Alto Networks and Sabre Insurance Group, you can compare the effects of market volatilities on Palo Alto and Sabre Insurance 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 Palo Alto with a short position of Sabre Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palo Alto and Sabre Insurance.

Diversification Opportunities for Palo Alto and Sabre Insurance

-0.37

Correlation Coefficient

Palo Alto  Sabre Insurance

Very good diversification

The 3 months correlation between Palo and Sabre is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Palo Alto Networks and Sabre Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabre Insurance Group and Palo Alto 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 Palo Alto Networks are associated (or correlated) with Sabre Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabre Insurance Group has no effect on the direction of Palo Alto i.e., Palo Alto and Sabre Insurance go up and down completely randomly.

Pair Corralation between Palo Alto and Sabre Insurance

Assuming the 90 days horizon Palo Alto Networks is expected to under-perform the Sabre Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Palo Alto Networks is 1.56 times less risky than Sabre Insurance. The stock trades about -0.5 of its potential returns per unit of risk. The Sabre Insurance Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  162.00  in Sabre Insurance Group on October 15, 2024 and sell it today you would lose (4.00) from holding Sabre Insurance Group or give up 2.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Palo Alto Networks  vs.  Sabre Insurance Group

Palo Alto Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palo Alto Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Palo Alto is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sabre Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabre Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sabre Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Palo Alto and Sabre Insurance

The main advantage of trading using opposite Palo Alto and Sabre Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palo Alto position performs unexpectedly, Sabre Insurance 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 Sabre Insurance will offset losses from the drop in Sabre Insurance's long position.

The idea behind Palo Alto Networks and Sabre Insurance Group 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.