Correlation Between Palo Alto and ProSiebenSat1 Media

Can any of the company-specific risk be diversified away by investing in both Palo Alto and ProSiebenSat1 Media 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 ProSiebenSat1 Media 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 ProSiebenSat1 Media AG, you can compare the effects of market volatilities on Palo Alto and ProSiebenSat1 Media 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 ProSiebenSat1 Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palo Alto and ProSiebenSat1 Media.

Diversification Opportunities for Palo Alto and ProSiebenSat1 Media

0.01

Correlation Coefficient

Palo Alto  ProSiebenSat1 Media

Significant diversification

The 3 months correlation between Palo and ProSiebenSat1 is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Palo Alto Networks and ProSiebenSat1 Media AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProSiebenSat1 Media 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 ProSiebenSat1 Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProSiebenSat1 Media has no effect on the direction of Palo Alto i.e., Palo Alto and ProSiebenSat1 Media go up and down completely randomly.

Pair Corralation between Palo Alto and ProSiebenSat1 Media

Given the investment horizon of 90 days Palo Alto Networks is expected to under-perform the ProSiebenSat1 Media. But the stock apears to be less risky and, when comparing its historical volatility, Palo Alto Networks is 1.57 times less risky than ProSiebenSat1 Media. The stock trades about -0.04 of its potential returns per unit of risk. The ProSiebenSat1 Media AG is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  129.00  in ProSiebenSat1 Media AG on December 30, 2024 and sell it today you would earn a total of  25.00  from holding ProSiebenSat1 Media AG or generate 19.38% return on investment over 90 days.

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

Palo Alto Networks  vs.  ProSiebenSat1 Media AG

Palo Alto Networks

Risk-Adjusted Performance

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 fairly stable basic indicators, Palo Alto is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ProSiebenSat1 Media

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProSiebenSat1 Media AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, ProSiebenSat1 Media showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palo Alto and ProSiebenSat1 Media

The main advantage of trading using opposite Palo Alto and ProSiebenSat1 Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palo Alto position performs unexpectedly, ProSiebenSat1 Media 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 ProSiebenSat1 Media will offset losses from the drop in ProSiebenSat1 Media's long position.

The idea behind Palo Alto Networks and ProSiebenSat1 Media AG 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.