Correlation Between Palomar Holdings and Old Dominion

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Can any of the company-specific risk be diversified away by investing in both Palomar Holdings and Old Dominion 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 Old Dominion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palomar Holdings and Old Dominion Freight, you can compare the effects of market volatilities on Palomar Holdings and Old Dominion 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 Old Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palomar Holdings and Old Dominion.

Diversification Opportunities for Palomar Holdings and Old Dominion

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between Palomar and Old is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and Old Dominion Freight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Dominion Freight 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 Old Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Dominion Freight has no effect on the direction of Palomar Holdings i.e., Palomar Holdings and Old Dominion go up and down completely randomly.

Pair Corralation between Palomar Holdings and Old Dominion

Given the investment horizon of 90 days Palomar Holdings is expected to generate 1.19 times more return on investment than Old Dominion. However, Palomar Holdings is 1.19 times more volatile than Old Dominion Freight. It trades about 0.07 of its potential returns per unit of risk. Old Dominion Freight is currently generating about 0.02 per unit of risk. If you would invest  5,185  in Palomar Holdings on October 4, 2024 and sell it today you would earn a total of  5,160  from holding Palomar Holdings or generate 99.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Palomar Holdings  vs.  Old Dominion Freight

 Performance 
       Timeline  
Palomar Holdings 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, Palomar Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.
Old Dominion Freight 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Old Dominion Freight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Palomar Holdings and Old Dominion Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Palomar Holdings and Old Dominion

The main advantage of trading using opposite Palomar Holdings and Old Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palomar Holdings position performs unexpectedly, Old Dominion 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 Old Dominion will offset losses from the drop in Old Dominion's long position.
The idea behind Palomar Holdings and Old Dominion Freight 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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