Correlation Between Palmer Square and Cajxx

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

By analyzing existing cross correlation between Palmer Square Ultra Short and Cajxx, you can compare the effects of market volatilities on Palmer Square and Cajxx 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 Palmer Square with a short position of Cajxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palmer Square and Cajxx.

Diversification Opportunities for Palmer Square and Cajxx

-0.64

Correlation Coefficient

Palmer Square  Cajxx

Excellent diversification

The 3 months correlation between Palmer and Cajxx is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Palmer Square Ultra Short and Cajxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cajxx and Palmer Square 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 Palmer Square Ultra Short are associated (or correlated) with Cajxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cajxx has no effect on the direction of Palmer Square i.e., Palmer Square and Cajxx go up and down completely randomly.

Pair Corralation between Palmer Square and Cajxx

Assuming the 90 days horizon Palmer Square is expected to generate 847.56 times less return on investment than Cajxx. But when comparing it to its historical volatility, Palmer Square Ultra Short is 2375.3 times less risky than Cajxx. It trades about 0.46 of its potential returns per unit of risk. Cajxx is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Cajxx on October 17, 2024 and sell it today you would earn a total of  0.00  from holding Cajxx or generate 0.0% return on investment over 90 days.

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

Palmer Square Ultra Short  vs.  Cajxx

Palmer Square Ultra

Risk-Adjusted Performance

53 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Palmer Square Ultra Short are ranked lower than 53 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Palmer Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cajxx

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cajxx are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Cajxx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palmer Square and Cajxx

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

The idea behind Palmer Square Ultra Short and Cajxx 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.