Correlation Between NI Holdings and Palomar Holdings

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

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

Diversification Opportunities for NI Holdings and Palomar Holdings

0.69

Correlation Coefficient

NI Holdings  Palomar Holdings

Poor diversification

The 3 months correlation between NODK and Palomar is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings and NI Holdings 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 NI Holdings 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 NI Holdings i.e., NI Holdings and Palomar Holdings go up and down completely randomly.

Pair Corralation between NI Holdings and Palomar Holdings

Given the investment horizon of 90 days NI Holdings is expected to generate 6.72 times less return on investment than Palomar Holdings. But when comparing it to its historical volatility, NI Holdings is 1.65 times less risky than Palomar Holdings. It trades about 0.02 of its potential returns per unit of risk. Palomar Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,573  in Palomar Holdings on September 22, 2024 and sell it today you would earn a total of  920.00  from holding Palomar Holdings or generate 9.61% return on investment over 90 days.

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

NI Holdings  vs.  Palomar Holdings

NI Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, NI Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

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 NI Holdings and Palomar Holdings

The main advantage of trading using opposite NI Holdings and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NI Holdings 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 NI Holdings 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.