Correlation Between First Ship and Palomar Holdings

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

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

Diversification Opportunities for First Ship and Palomar Holdings

0.0

Correlation Coefficient

First Ship  Palomar Holdings

Pay attention - limited upside

The 3 months correlation between First and Palomar is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Ship Lease and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings and First Ship 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 First Ship Lease 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 First Ship i.e., First Ship and Palomar Holdings go up and down completely randomly.

Pair Corralation between First Ship and Palomar Holdings

If you would invest  10,257  in Palomar Holdings on December 22, 2024 and sell it today you would earn a total of  2,675  from holding Palomar Holdings or generate 26.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

First Ship Lease  vs.  Palomar Holdings

First Ship Lease

Risk-Adjusted Performance

Very Weak

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

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 First Ship and Palomar Holdings

The main advantage of trading using opposite First Ship and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Ship 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 First Ship Lease 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..