Correlation Between Short Term and Palmer Square

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

By analyzing existing cross correlation between Short Term Income Fund and Palmer Square Income, you can compare the effects of market volatilities on Short Term and Palmer Square 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 Short Term with a short position of Palmer Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Term and Palmer Square.

Diversification Opportunities for Short Term and Palmer Square

0.99

Correlation Coefficient

Short Term  Palmer Square

No risk reduction

The 3 months correlation between Short and Palmer is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Income Fund and Palmer Square Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palmer Square Income and Short Term 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 Short Term Income Fund are associated (or correlated) with Palmer Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palmer Square Income has no effect on the direction of Short Term i.e., Short Term and Palmer Square go up and down completely randomly.

Pair Corralation between Short Term and Palmer Square

Assuming the 90 days horizon Short Term is expected to generate 1.1 times less return on investment than Palmer Square. But when comparing it to its historical volatility, Short Term Income Fund is 1.1 times less risky than Palmer Square. It trades about 0.35 of its potential returns per unit of risk. Palmer Square Income is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  1,006  in Palmer Square Income on September 23, 2024 and sell it today you would earn a total of  11.00  from holding Palmer Square Income or generate 1.09% return on investment over 90 days.

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

Short Term Income Fund  vs.  Palmer Square Income

Short Term Income

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Income Fund are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Short Term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Palmer Square Income

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Palmer Square Income are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Palmer Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short Term and Palmer Square

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

The idea behind Short Term Income Fund and Palmer Square Income 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.