Correlation Between Bt Brands and Palomar Holdings

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

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

Diversification Opportunities for Bt Brands and Palomar Holdings

-0.44

Correlation Coefficient

Bt Brands  Palomar Holdings

Very good diversification

The 3 months correlation between BTBD and Palomar is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bt Brands and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings and Bt Brands 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 Bt Brands 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 Bt Brands i.e., Bt Brands and Palomar Holdings go up and down completely randomly.

Pair Corralation between Bt Brands and Palomar Holdings

Given the investment horizon of 90 days Bt Brands is expected to under-perform the Palomar Holdings. In addition to that, Bt Brands is 2.16 times more volatile than Palomar Holdings. It trades about -0.15 of its total potential returns per unit of risk. Palomar Holdings is currently generating about -0.07 per unit of volatility. If you would invest  10,716  in Palomar Holdings on September 20, 2024 and sell it today you would lose (335.00) from holding Palomar Holdings or give up 3.13% of portfolio value over 90 days.

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

Bt Brands  vs.  Palomar Holdings

Bt Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bt Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Palomar Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Palomar Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bt Brands and Palomar Holdings

The main advantage of trading using opposite Bt Brands and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bt Brands 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 Bt Brands 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.