Correlation Between Palantir Technologies and East Japan

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

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

Diversification Opportunities for Palantir Technologies and East Japan

0.17

Correlation Coefficient

Palantir Technologies  East Japan

Average diversification

The 3 months correlation between Palantir and East is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies and East Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Japan Railway 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 East Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Japan Railway has no effect on the direction of Palantir Technologies i.e., Palantir Technologies and East Japan go up and down completely randomly.

Pair Corralation between Palantir Technologies and East Japan

Assuming the 90 days horizon Palantir Technologies is expected to generate 4.2 times more return on investment than East Japan. However, Palantir Technologies is 4.2 times more volatile than East Japan Railway. It trades about 0.08 of its potential returns per unit of risk. East Japan Railway is currently generating about 0.12 per unit of risk. If you would invest  7,611  in Palantir Technologies on December 26, 2024 and sell it today you would earn a total of  1,402  from holding Palantir Technologies or generate 18.42% return on investment over 90 days.

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

Palantir Technologies  vs.  East Japan Railway

Palantir Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 6 (%) 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.

East Japan Railway

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in East Japan Railway are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, East Japan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Palantir Technologies and East Japan

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

The idea behind Palantir Technologies and East Japan Railway 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..