Correlation Between GEAR4MUSIC and Palantir Technologies

Can any of the company-specific risk be diversified away by investing in both GEAR4MUSIC 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 GEAR4MUSIC and Palantir Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GEAR4MUSIC LS 10 and Palantir Technologies, you can compare the effects of market volatilities on GEAR4MUSIC 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 GEAR4MUSIC with a short position of Palantir Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEAR4MUSIC and Palantir Technologies.

Diversification Opportunities for GEAR4MUSIC and Palantir Technologies

-0.3

Correlation Coefficient

GEAR4MUSIC  Palantir Technologies

Very good diversification

The 3 months correlation between GEAR4MUSIC and Palantir is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding GEAR4MUSIC LS 10 and Palantir Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palantir Technologies and GEAR4MUSIC 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 GEAR4MUSIC LS 10 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 GEAR4MUSIC i.e., GEAR4MUSIC and Palantir Technologies go up and down completely randomly.

Pair Corralation between GEAR4MUSIC and Palantir Technologies

Assuming the 90 days horizon GEAR4MUSIC is expected to generate 42.99 times less return on investment than Palantir Technologies. But when comparing it to its historical volatility, GEAR4MUSIC LS 10 is 1.53 times less risky than Palantir Technologies. It trades about 0.01 of its potential returns per unit of risk. Palantir Technologies is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  6,334  in Palantir Technologies on September 30, 2024 and sell it today you would earn a total of  1,277  from holding Palantir Technologies or generate 20.16% return on investment over 90 days.

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

GEAR4MUSIC LS 10  vs.  Palantir Technologies

GEAR4MUSIC LS 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GEAR4MUSIC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Palantir Technologies

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 25 (%) 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.

Pair Trading with GEAR4MUSIC and Palantir Technologies

The main advantage of trading using opposite GEAR4MUSIC and Palantir Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEAR4MUSIC 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 GEAR4MUSIC LS 10 and Palantir Technologies 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.