Correlation Between Palomar Holdings and ATRenew

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

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

Diversification Opportunities for Palomar Holdings and ATRenew

0.64

Correlation Coefficient

Palomar Holdings  ATRenew

Poor diversification

The 3 months correlation between Palomar and ATRenew is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and ATRenew Inc DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATRenew Inc DRC and Palomar Holdings 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 Palomar Holdings are associated (or correlated) with ATRenew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATRenew Inc DRC has no effect on the direction of Palomar Holdings i.e., Palomar Holdings and ATRenew go up and down completely randomly.

Pair Corralation between Palomar Holdings and ATRenew

Given the investment horizon of 90 days Palomar Holdings is expected to generate 2.03 times less return on investment than ATRenew. But when comparing it to its historical volatility, Palomar Holdings is 2.16 times less risky than ATRenew. It trades about 0.1 of its potential returns per unit of risk. ATRenew Inc DRC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  234.00  in ATRenew Inc DRC on September 16, 2024 and sell it today you would earn a total of  62.00  from holding ATRenew Inc DRC or generate 26.5% return on investment over 90 days.

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

Palomar Holdings  vs.  ATRenew Inc DRC

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.

ATRenew Inc DRC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATRenew Inc DRC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ATRenew exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palomar Holdings and ATRenew

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

The idea behind Palomar Holdings and ATRenew Inc DRC 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.