Correlation Between Blue Owl and Palomar Holdings

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

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

Diversification Opportunities for Blue Owl and Palomar Holdings

0.5

Correlation Coefficient

Blue Owl  Palomar Holdings

Very weak diversification

The 3 months correlation between Blue and Palomar is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Blue Owl Capital and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings and Blue Owl 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 Blue Owl Capital 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 Blue Owl i.e., Blue Owl and Palomar Holdings go up and down completely randomly.

Pair Corralation between Blue Owl and Palomar Holdings

Given the investment horizon of 90 days Blue Owl is expected to generate 4.73 times less return on investment than Palomar Holdings. But when comparing it to its historical volatility, Blue Owl Capital is 2.9 times less risky than Palomar Holdings. It trades about 0.07 of its potential returns per unit of risk. Palomar Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,827  in Palomar Holdings on September 13, 2024 and sell it today you would earn a total of  5,018  from holding Palomar Holdings or generate 86.12% return on investment over 90 days.

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

Blue Owl Capital  vs.  Palomar Holdings

Blue Owl Capital

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Owl Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Blue Owl may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Palomar Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Palomar Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blue Owl and Palomar Holdings

The main advantage of trading using opposite Blue Owl and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Owl 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 Blue Owl Capital 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.