Correlation Between Palantir Technologies and MI Homes

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

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

Diversification Opportunities for Palantir Technologies and MI Homes

-0.2

Correlation Coefficient

Palantir Technologies  MI Homes

Good diversification

The 3 months correlation between Palantir and 4MI is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes 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 MI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MI Homes has no effect on the direction of Palantir Technologies i.e., Palantir Technologies and MI Homes go up and down completely randomly.

Pair Corralation between Palantir Technologies and MI Homes

Assuming the 90 days horizon Palantir Technologies is expected to generate 1.89 times more return on investment than MI Homes. However, Palantir Technologies is 1.89 times more volatile than MI Homes. It trades about 0.13 of its potential returns per unit of risk. MI Homes is currently generating about 0.1 per unit of risk. If you would invest  653.00  in Palantir Technologies on October 4, 2024 and sell it today you would earn a total of  6,735  from holding Palantir Technologies or generate 1031.39% return on investment over 90 days.

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

Palantir Technologies  vs.  MI Homes

Palantir Technologies

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Palantir Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

MI Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MI Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Palantir Technologies and MI Homes

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

The idea behind Palantir Technologies and MI Homes 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.