Correlation Between Palo Alto and Argentum

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

By analyzing existing cross correlation between Palo Alto Networks and Argentum 47, you can compare the effects of market volatilities on Palo Alto and Argentum 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 Palo Alto with a short position of Argentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palo Alto and Argentum.

Diversification Opportunities for Palo Alto and Argentum

-0.3

Correlation Coefficient

Palo Alto  Argentum

Very good diversification

The 3 months correlation between Palo and Argentum is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Palo Alto Networks and Argentum 47 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argentum 47 and Palo Alto 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 Palo Alto Networks are associated (or correlated) with Argentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argentum 47 has no effect on the direction of Palo Alto i.e., Palo Alto and Argentum go up and down completely randomly.

Pair Corralation between Palo Alto and Argentum

Given the investment horizon of 90 days Palo Alto is expected to generate 1.73 times less return on investment than Argentum. But when comparing it to its historical volatility, Palo Alto Networks is 5.53 times less risky than Argentum. It trades about 0.08 of its potential returns per unit of risk. Argentum 47 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9.95  in Argentum 47 on October 11, 2024 and sell it today you would lose (9.48) from holding Argentum 47 or give up 95.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Palo Alto Networks  vs.  Argentum 47

Palo Alto Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palo Alto Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Argentum 47

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Argentum 47 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Argentum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palo Alto and Argentum

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

The idea behind Palo Alto Networks and Argentum 47 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.