Correlation Between Transocean and Palantir Technologies

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

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

Diversification Opportunities for Transocean and Palantir Technologies

0.19

Correlation Coefficient

Transocean  Palantir Technologies

Average diversification

The 3 months correlation between Transocean and Palantir is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Transocean and Palantir Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palantir Technologies and Transocean 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 Transocean are associated (or correlated) with Palantir Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palantir Technologies has no effect on the direction of Transocean i.e., Transocean and Palantir Technologies go up and down completely randomly.

Pair Corralation between Transocean and Palantir Technologies

Assuming the 90 days trading horizon Transocean is expected to under-perform the Palantir Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Transocean is 1.34 times less risky than Palantir Technologies. The stock trades about -0.04 of its potential returns per unit of risk. The Palantir Technologies is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  6,720  in Palantir Technologies on September 24, 2024 and sell it today you would earn a total of  9,449  from holding Palantir Technologies or generate 140.61% return on investment over 90 days.

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

Transocean  vs.  Palantir Technologies

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Palantir Technologies

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Palantir Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transocean and Palantir Technologies

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

The idea behind Transocean and Palantir Technologies 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.