Correlation Between Aterian and Palomar Holdings

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

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

Diversification Opportunities for Aterian and Palomar Holdings

-0.43

Correlation Coefficient

Aterian  Palomar Holdings

Very good diversification

The 3 months correlation between Aterian and Palomar is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aterian and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings and Aterian 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 Aterian 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 Aterian i.e., Aterian and Palomar Holdings go up and down completely randomly.

Pair Corralation between Aterian and Palomar Holdings

Given the investment horizon of 90 days Aterian is expected to generate 1.51 times less return on investment than Palomar Holdings. In addition to that, Aterian is 2.25 times more volatile than Palomar Holdings. It trades about 0.05 of its total potential returns per unit of risk. Palomar Holdings is currently generating about 0.16 per unit of volatility. If you would invest  10,257  in Palomar Holdings on December 21, 2024 and sell it today you would earn a total of  2,815  from holding Palomar Holdings or generate 27.44% return on investment over 90 days.

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

Aterian  vs.  Palomar Holdings

Aterian

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aterian are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Aterian reported solid returns over the last few months and may actually be approaching a breakup point.

Palomar Holdings

Risk-Adjusted Performance

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.

Pair Trading with Aterian and Palomar Holdings

The main advantage of trading using opposite Aterian and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aterian 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.

The idea behind Aterian and Palomar Holdings 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.