Correlation Between Hotchkis Wiley and Palmer Square

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

By analyzing existing cross correlation between Hotchkis Wiley Value and Palmer Square Income, you can compare the effects of market volatilities on Hotchkis Wiley and Palmer Square 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 Hotchkis Wiley with a short position of Palmer Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotchkis Wiley and Palmer Square.

Diversification Opportunities for Hotchkis Wiley and Palmer Square

0.87

Correlation Coefficient

Hotchkis Wiley  Palmer Square

Very poor diversification

The 3 months correlation between Hotchkis and Palmer is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Hotchkis Wiley Value and Palmer Square Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palmer Square Income and Hotchkis Wiley 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 Hotchkis Wiley Value are associated (or correlated) with Palmer Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palmer Square Income has no effect on the direction of Hotchkis Wiley i.e., Hotchkis Wiley and Palmer Square go up and down completely randomly.

Pair Corralation between Hotchkis Wiley and Palmer Square

Assuming the 90 days horizon Hotchkis Wiley Value is expected to generate 13.59 times more return on investment than Palmer Square. However, Hotchkis Wiley is 13.59 times more volatile than Palmer Square Income. It trades about 0.23 of its potential returns per unit of risk. Palmer Square Income is currently generating about 0.43 per unit of risk. If you would invest  4,107  in Hotchkis Wiley Value on September 5, 2024 and sell it today you would earn a total of  180.00  from holding Hotchkis Wiley Value or generate 4.38% return on investment over 90 days.

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

Hotchkis Wiley Value  vs.  Palmer Square Income

Hotchkis Wiley Value

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hotchkis Wiley Value are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hotchkis Wiley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Palmer Square Income

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Palmer Square Income are ranked lower than 33 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Palmer Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hotchkis Wiley and Palmer Square

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

The idea behind Hotchkis Wiley Value and Palmer Square Income 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.