Correlation Between Melar Acquisition and Palomar Holdings

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

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

Diversification Opportunities for Melar Acquisition and Palomar Holdings

-0.14

Correlation Coefficient

Melar Acquisition  Palomar Holdings

Good diversification

The 3 months correlation between Melar and Palomar is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Melar Acquisition Corp and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings and Melar Acquisition 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 Melar Acquisition Corp 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 Melar Acquisition i.e., Melar Acquisition and Palomar Holdings go up and down completely randomly.

Pair Corralation between Melar Acquisition and Palomar Holdings

Assuming the 90 days horizon Melar Acquisition Corp is expected to generate 3.03 times more return on investment than Palomar Holdings. However, Melar Acquisition is 3.03 times more volatile than Palomar Holdings. It trades about 0.17 of its potential returns per unit of risk. Palomar Holdings is currently generating about -0.08 per unit of risk. If you would invest  9.51  in Melar Acquisition Corp on September 22, 2024 and sell it today you would earn a total of  1.49  from holding Melar Acquisition Corp or generate 15.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

Melar Acquisition Corp  vs.  Palomar Holdings

Melar Acquisition Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Melar Acquisition Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Melar Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Palomar Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 5 (%) 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 Melar Acquisition and Palomar Holdings

The main advantage of trading using opposite Melar Acquisition and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melar Acquisition 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 Melar Acquisition Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.