Correlation Between VMware and Palantir Technologies

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

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

Diversification Opportunities for VMware and Palantir Technologies

0.0

Correlation Coefficient

VMware  Palantir Technologies

Pay attention - limited upside

The 3 months correlation between VMware and Palantir is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Palantir Technologies Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palantir Technologies and VMware 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 VMware Inc are associated (or correlated) with Palantir Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palantir Technologies has no effect on the direction of VMware i.e., VMware and Palantir Technologies go up and down completely randomly.

Pair Corralation between VMware and Palantir Technologies

If you would invest  7,718  in Palantir Technologies Class on December 29, 2024 and sell it today you would earn a total of  1,291  from holding Palantir Technologies Class or generate 16.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

VMware Inc  vs.  Palantir Technologies Class

VMware Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days VMware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, VMware is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Palantir Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies Class are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Palantir Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VMware and Palantir Technologies

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

The idea behind VMware Inc and Palantir Technologies Class 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.