Correlation Between Palantir Technologies and Nidec

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

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

Diversification Opportunities for Palantir Technologies and Nidec

-0.35

Correlation Coefficient

Palantir Technologies  Nidec

Very good diversification

The 3 months correlation between Palantir and Nidec is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies and Nidec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nidec 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 Nidec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nidec has no effect on the direction of Palantir Technologies i.e., Palantir Technologies and Nidec go up and down completely randomly.

Pair Corralation between Palantir Technologies and Nidec

Assuming the 90 days horizon Palantir Technologies is expected to generate 1.92 times more return on investment than Nidec. However, Palantir Technologies is 1.92 times more volatile than Nidec. It trades about 0.21 of its potential returns per unit of risk. Nidec is currently generating about -0.02 per unit of risk. If you would invest  3,878  in Palantir Technologies on October 15, 2024 and sell it today you would earn a total of  2,671  from holding Palantir Technologies or generate 68.88% 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.  Nidec

Palantir Technologies

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 16 (%) 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.

Nidec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nidec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Nidec is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Palantir Technologies and Nidec

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

The idea behind Palantir Technologies and Nidec 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.