Correlation Between Palantir Technologies and Shopify

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

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

Diversification Opportunities for Palantir Technologies and Shopify

0.93

Correlation Coefficient

Palantir Technologies  Shopify

Almost no diversification

The 3 months correlation between Palantir and Shopify is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify 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 are associated (or correlated) with Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of Palantir Technologies i.e., Palantir Technologies and Shopify go up and down completely randomly.

Pair Corralation between Palantir Technologies and Shopify

Assuming the 90 days horizon Palantir Technologies is expected to generate 0.82 times more return on investment than Shopify. However, Palantir Technologies is 1.22 times less risky than Shopify. It trades about 0.37 of its potential returns per unit of risk. Shopify is currently generating about 0.24 per unit of risk. If you would invest  4,656  in Palantir Technologies on October 6, 2024 and sell it today you would earn a total of  3,069  from holding Palantir Technologies or generate 65.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Palantir Technologies  vs.  Shopify

Palantir Technologies

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Palantir Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Shopify

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shopify reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palantir Technologies and Shopify

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

The idea behind Palantir Technologies and Shopify 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.