Correlation Between Kemper and Palomar Holdings

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

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

Diversification Opportunities for Kemper and Palomar Holdings

0.43

Correlation Coefficient

Kemper  Palomar Holdings

Very weak diversification

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

Pair Corralation between Kemper and Palomar Holdings

Given the investment horizon of 90 days Kemper is expected to generate 10.13 times less return on investment than Palomar Holdings. But when comparing it to its historical volatility, Kemper is 1.71 times less risky than Palomar Holdings. It trades about 0.03 of its potential returns per unit of risk. Palomar Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  10,445  in Palomar Holdings on December 29, 2024 and sell it today you would earn a total of  3,215  from holding Palomar Holdings or generate 30.78% return on investment over 90 days.

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

Kemper  vs.  Palomar Holdings

Kemper

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kemper are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Kemper is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Palomar Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 13 (%) 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 Kemper and Palomar Holdings

The main advantage of trading using opposite Kemper and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kemper 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 Kemper 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.