Correlation Between W R and Palomar Holdings

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

By analyzing existing cross correlation between W R Berkley and Palomar Holdings, you can compare the effects of market volatilities on W R and Palomar Holdings 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 W R with a short position of Palomar Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of W R and Palomar Holdings.

Diversification Opportunities for W R and Palomar Holdings

-0.35

Correlation Coefficient

W R  Palomar Holdings

Very good diversification

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

Pair Corralation between W R and Palomar Holdings

Assuming the 90 days trading horizon W R Berkley is expected to under-perform the Palomar Holdings. But the preferred stock apears to be less risky and, when comparing its historical volatility, W R Berkley is 2.94 times less risky than Palomar Holdings. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Palomar Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10,848  in Palomar Holdings on September 19, 2024 and sell it today you would earn a total of  267.00  from holding Palomar Holdings or generate 2.46% return on investment over 90 days.

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

W R Berkley  vs.  Palomar Holdings

W R Berkley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days W R Berkley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, W R is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Palomar Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Palomar Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with W R and Palomar Holdings

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

The idea behind W R Berkley and Palomar Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.