Correlation Between Palantir Technologies and US FOODS

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

By analyzing existing cross correlation between Palantir Technologies and US FOODS HOLDING, you can compare the effects of market volatilities on Palantir Technologies and US FOODS 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 US FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palantir Technologies and US FOODS.

Diversification Opportunities for Palantir Technologies and US FOODS

0.96

Correlation Coefficient

Palantir Technologies  US FOODS

Almost no diversification

The 3 months correlation between Palantir and UFH is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies and US FOODS HOLDING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US FOODS HOLDING 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 are associated (or correlated) with US FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US FOODS HOLDING has no effect on the direction of Palantir Technologies i.e., Palantir Technologies and US FOODS go up and down completely randomly.

Pair Corralation between Palantir Technologies and US FOODS

Assuming the 90 days horizon Palantir Technologies is expected to generate 2.83 times more return on investment than US FOODS. However, Palantir Technologies is 2.83 times more volatile than US FOODS HOLDING. It trades about 0.28 of its potential returns per unit of risk. US FOODS HOLDING is currently generating about 0.16 per unit of risk. If you would invest  3,428  in Palantir Technologies on September 22, 2024 and sell it today you would earn a total of  3,758  from holding Palantir Technologies or generate 109.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.48%
Values	Daily Returns

Palantir Technologies  vs.  US FOODS HOLDING

Palantir Technologies

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Palantir Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

US FOODS HOLDING

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US FOODS HOLDING are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, US FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palantir Technologies and US FOODS

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

The idea behind Palantir Technologies and US FOODS HOLDING 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.