Correlation Between Palantir Technologies and BM European

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

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

Diversification Opportunities for Palantir Technologies and BM European

-0.88

Correlation Coefficient

Palantir Technologies  BM European

Pay attention - limited upside

The 3 months correlation between Palantir and BMRRY is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies Class and BM European Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BM European Value and Palantir Technologies 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 Palantir Technologies Class are associated (or correlated) with BM European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BM European Value has no effect on the direction of Palantir Technologies i.e., Palantir Technologies and BM European go up and down completely randomly.

Pair Corralation between Palantir Technologies and BM European

Given the investment horizon of 90 days Palantir Technologies Class is expected to generate 2.2 times more return on investment than BM European. However, Palantir Technologies is 2.2 times more volatile than BM European Value. It trades about 0.33 of its potential returns per unit of risk. BM European Value is currently generating about 0.18 per unit of risk. If you would invest  6,605  in Palantir Technologies Class on September 28, 2024 and sell it today you would earn a total of  1,609  from holding Palantir Technologies Class or generate 24.36% return on investment over 90 days.

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

Palantir Technologies Class  vs.  BM European Value

Palantir Technologies

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies Class are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Palantir Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

BM European Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BM European Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Palantir Technologies and BM European

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

The idea behind Palantir Technologies Class and BM European Value 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.