Correlation Between Palo Alto and Aeroports

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

By analyzing existing cross correlation between Palo Alto Networks and Aeroports de Paris, you can compare the effects of market volatilities on Palo Alto and Aeroports 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 Palo Alto with a short position of Aeroports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palo Alto and Aeroports.

Diversification Opportunities for Palo Alto and Aeroports

-0.86

Correlation Coefficient

Palo Alto  Aeroports

Pay attention - limited upside

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

Pair Corralation between Palo Alto and Aeroports

Given the investment horizon of 90 days Palo Alto Networks is expected to generate 0.84 times more return on investment than Aeroports. However, Palo Alto Networks is 1.19 times less risky than Aeroports. It trades about 0.13 of its potential returns per unit of risk. Aeroports de Paris is currently generating about -0.05 per unit of risk. If you would invest  34,374  in Palo Alto Networks on September 5, 2024 and sell it today you would earn a total of  4,885  from holding Palo Alto Networks or generate 14.21% return on investment over 90 days.

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

Palo Alto Networks  vs.  Aeroports de Paris

Palo Alto Networks

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palo Alto Networks are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Palo Alto showed solid returns over the last few months and may actually be approaching a breakup point.

Aeroports de Paris

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeroports de Paris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Palo Alto and Aeroports

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

The idea behind Palo Alto Networks and Aeroports de Paris 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.