Correlation Between Palantir Technologies and Lafargeholcim

Can any of the company-specific risk be diversified away by investing in both Palantir Technologies and Lafargeholcim 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 Lafargeholcim 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 Lafargeholcim Ltd ADR, you can compare the effects of market volatilities on Palantir Technologies and Lafargeholcim 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 Lafargeholcim. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palantir Technologies and Lafargeholcim.

Diversification Opportunities for Palantir Technologies and Lafargeholcim

0.78

Correlation Coefficient

Palantir Technologies  Lafargeholcim

Poor diversification

The 3 months correlation between Palantir and Lafargeholcim is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies Class and Lafargeholcim Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lafargeholcim ADR 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 Lafargeholcim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lafargeholcim ADR has no effect on the direction of Palantir Technologies i.e., Palantir Technologies and Lafargeholcim go up and down completely randomly.

Pair Corralation between Palantir Technologies and Lafargeholcim

Given the investment horizon of 90 days Palantir Technologies Class is expected to generate 3.8 times more return on investment than Lafargeholcim. However, Palantir Technologies is 3.8 times more volatile than Lafargeholcim Ltd ADR. It trades about 0.31 of its potential returns per unit of risk. Lafargeholcim Ltd ADR is currently generating about 0.11 per unit of risk. If you would invest  3,051  in Palantir Technologies Class on September 2, 2024 and sell it today you would earn a total of  3,657  from holding Palantir Technologies Class or generate 119.86% return on investment over 90 days.

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

Palantir Technologies Class  vs.  Lafargeholcim Ltd ADR

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 abnormal basic indicators, Palantir Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Lafargeholcim ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lafargeholcim Ltd ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Lafargeholcim may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Palantir Technologies and Lafargeholcim

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

The idea behind Palantir Technologies Class and Lafargeholcim Ltd ADR 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.