Correlation Between Palantir Technologies and Newtopia

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

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

Diversification Opportunities for Palantir Technologies and Newtopia

-0.53

Correlation Coefficient

Palantir Technologies  Newtopia

Excellent diversification

The 3 months correlation between Palantir and Newtopia is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies Class and Newtopia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtopia and Palantir Technologies 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 Palantir Technologies Class are associated (or correlated) with Newtopia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtopia has no effect on the direction of Palantir Technologies i.e., Palantir Technologies and Newtopia go up and down completely randomly.

Pair Corralation between Palantir Technologies and Newtopia

Given the investment horizon of 90 days Palantir Technologies Class is expected to generate 0.23 times more return on investment than Newtopia. However, Palantir Technologies Class is 4.3 times less risky than Newtopia. It trades about 0.1 of its potential returns per unit of risk. Newtopia is currently generating about 0.0 per unit of risk. If you would invest  6,639  in Palantir Technologies Class on December 2, 2024 and sell it today you would earn a total of  1,853  from holding Palantir Technologies Class or generate 27.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.85%
Values	Daily Returns

Palantir Technologies Class  vs.  Newtopia

Palantir Technologies

Risk-Adjusted Performance

OK

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

Newtopia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newtopia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Newtopia is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Palantir Technologies and Newtopia

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

The idea behind Palantir Technologies Class and Newtopia 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.