Correlation Between Palmer Square and Total Income

Can any of the company-specific risk be diversified away by investing in both Palmer Square and Total Income 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 Total Income 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 Total Income Real, you can compare the effects of market volatilities on Palmer Square and Total Income 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 Total Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palmer Square and Total Income.

Diversification Opportunities for Palmer Square and Total Income

-0.1

Correlation Coefficient

Palmer Square  Total Income

Good diversification

The 3 months correlation between Palmer and Total is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Palmer Square Ultra Short and Total Income Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Income Real 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 Total Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Income Real has no effect on the direction of Palmer Square i.e., Palmer Square and Total Income go up and down completely randomly.

Pair Corralation between Palmer Square and Total Income

Assuming the 90 days horizon Palmer Square Ultra Short is expected to under-perform the Total Income. But the mutual fund apears to be less risky and, when comparing its historical volatility, Palmer Square Ultra Short is 1.55 times less risky than Total Income. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Total Income Real is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,700  in Total Income Real on October 15, 2024 and sell it today you would lose (21.00) from holding Total Income Real or give up 0.78% of portfolio value over 90 days.

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

Palmer Square Ultra Short  vs.  Total Income Real

Palmer Square Ultra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palmer Square Ultra Short has generated negative risk-adjusted returns adding no value to fund investors. 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.

Total Income Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Income Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Total Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Palmer Square and Total Income

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

The idea behind Palmer Square Ultra Short and Total Income Real 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 Commodity Directory module to find actively traded commodities issued by global exchanges.