Correlation Between Bread Financial and Palantir Technologies

Can any of the company-specific risk be diversified away by investing in both Bread Financial and Palantir Technologies 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 Bread Financial and Palantir Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bread Financial Holdings and Palantir Technologies, you can compare the effects of market volatilities on Bread Financial and Palantir Technologies 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 Bread Financial with a short position of Palantir Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Palantir Technologies.

Diversification Opportunities for Bread Financial and Palantir Technologies

0.96

Correlation Coefficient

Bread Financial  Palantir Technologies

Almost no diversification

The 3 months correlation between Bread and Palantir is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Palantir Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palantir Technologies and Bread Financial 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 Bread Financial Holdings are associated (or correlated) with Palantir Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palantir Technologies has no effect on the direction of Bread Financial i.e., Bread Financial and Palantir Technologies go up and down completely randomly.

Pair Corralation between Bread Financial and Palantir Technologies

Assuming the 90 days trading horizon Bread Financial is expected to generate 3.5 times less return on investment than Palantir Technologies. But when comparing it to its historical volatility, Bread Financial Holdings is 1.32 times less risky than Palantir Technologies. It trades about 0.06 of its potential returns per unit of risk. Palantir Technologies is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,123  in Palantir Technologies on September 27, 2024 and sell it today you would earn a total of  15,609  from holding Palantir Technologies or generate 1389.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.59%
Values	Daily Returns

Bread Financial Holdings  vs.  Palantir Technologies

Bread Financial Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Bread Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Palantir Technologies

Risk-Adjusted Performance

31 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Palantir Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bread Financial and Palantir Technologies

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

The idea behind Bread Financial Holdings and Palantir Technologies 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.