Correlation Between Palomar Holdings and Initio

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

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

Diversification Opportunities for Palomar Holdings and Initio

-0.28

Correlation Coefficient

Palomar Holdings  Initio

Very good diversification

The 3 months correlation between Palomar and Initio is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and Initio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Initio Inc and Palomar 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 Palomar Holdings are associated (or correlated) with Initio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Initio Inc has no effect on the direction of Palomar Holdings i.e., Palomar Holdings and Initio go up and down completely randomly.

Pair Corralation between Palomar Holdings and Initio

Given the investment horizon of 90 days Palomar Holdings is expected to generate 0.66 times more return on investment than Initio. However, Palomar Holdings is 1.51 times less risky than Initio. It trades about 0.14 of its potential returns per unit of risk. Initio Inc is currently generating about -0.17 per unit of risk. If you would invest  10,493  in Palomar Holdings on December 20, 2024 and sell it today you would earn a total of  2,449  from holding Palomar Holdings or generate 23.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Palomar Holdings  vs.  Initio Inc

Palomar Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Palomar Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Initio Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Initio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Palomar Holdings and Initio

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

The idea behind Palomar Holdings and Initio Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.