Correlation Between Canadian Palladium and Progressive Planet

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

By analyzing existing cross correlation between Canadian Palladium Resources and Progressive Planet Solutions, you can compare the effects of market volatilities on Canadian Palladium and Progressive Planet 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 Canadian Palladium with a short position of Progressive Planet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Palladium and Progressive Planet.

Diversification Opportunities for Canadian Palladium and Progressive Planet

-0.16

Correlation Coefficient

Canadian Palladium  Progressive Planet

Good diversification

The 3 months correlation between Canadian and Progressive is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Palladium Resources and Progressive Planet Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Progressive Planet and Canadian Palladium 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 Canadian Palladium Resources are associated (or correlated) with Progressive Planet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Progressive Planet has no effect on the direction of Canadian Palladium i.e., Canadian Palladium and Progressive Planet go up and down completely randomly.

Pair Corralation between Canadian Palladium and Progressive Planet

Assuming the 90 days horizon Canadian Palladium Resources is expected to generate 4.07 times more return on investment than Progressive Planet. However, Canadian Palladium is 4.07 times more volatile than Progressive Planet Solutions. It trades about 0.09 of its potential returns per unit of risk. Progressive Planet Solutions is currently generating about -0.1 per unit of risk. If you would invest  4.81  in Canadian Palladium Resources on November 29, 2024 and sell it today you would earn a total of  0.64  from holding Canadian Palladium Resources or generate 13.31% return on investment over 90 days.

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

Canadian Palladium Resources  vs.  Progressive Planet Solutions

Canadian Palladium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Palladium Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Canadian Palladium reported solid returns over the last few months and may actually be approaching a breakup point.

Progressive Planet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Progressive Planet Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Canadian Palladium and Progressive Planet

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

The idea behind Canadian Palladium Resources and Progressive Planet Solutions 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.