Correlation Between Palm Valley and Select Us

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

By analyzing existing cross correlation between Palm Valley Capital and Select Equity Fund, you can compare the effects of market volatilities on Palm Valley and Select Us 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 Palm Valley with a short position of Select Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palm Valley and Select Us.

Diversification Opportunities for Palm Valley and Select Us

0.86

Correlation Coefficient

Palm Valley  Select Us

Very poor diversification

The 3 months correlation between Palm and Select is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Palm Valley Capital and Select Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Equity and Palm Valley 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 Palm Valley Capital are associated (or correlated) with Select Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Equity has no effect on the direction of Palm Valley i.e., Palm Valley and Select Us go up and down completely randomly.

Pair Corralation between Palm Valley and Select Us

Assuming the 90 days horizon Palm Valley Capital is expected to generate 0.12 times more return on investment than Select Us. However, Palm Valley Capital is 8.22 times less risky than Select Us. It trades about -0.08 of its potential returns per unit of risk. Select Equity Fund is currently generating about -0.09 per unit of risk. If you would invest  1,254  in Palm Valley Capital on November 19, 2024 and sell it today you would lose (24.00) from holding Palm Valley Capital or give up 1.91% of portfolio value over 90 days.

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

Palm Valley Capital  vs.  Select Equity Fund

Palm Valley Capital

Risk-Adjusted Performance

Very Weak

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

Select Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Select Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Palm Valley and Select Us

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

The idea behind Palm Valley Capital and Select Equity Fund 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.