Correlation Between Smead Value and Palmer Square

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

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

Diversification Opportunities for Smead Value and Palmer Square

-0.09

Correlation Coefficient

Smead Value  Palmer Square

Good diversification

The 3 months correlation between Smead and Palmer is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value 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 Smead Value 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 Smead Value 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 Smead Value i.e., Smead Value and Palmer Square go up and down completely randomly.

Pair Corralation between Smead Value and Palmer Square

Assuming the 90 days horizon Smead Value Fund is expected to under-perform the Palmer Square. In addition to that, Smead Value is 16.07 times more volatile than Palmer Square Income. It trades about -0.04 of its total potential returns per unit of risk. Palmer Square Income is currently generating about 0.38 per unit of volatility. If you would invest  1,005  in Palmer Square Income on September 14, 2024 and sell it today you would earn a total of  12.00  from holding Palmer Square Income or generate 1.19% return on investment over 90 days.

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

Smead Value Fund  vs.  Palmer Square Income

Smead Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smead Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Smead Value 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

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Palmer Square Income are ranked lower than 29 (%) 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 Smead Value and Palmer Square

The main advantage of trading using opposite Smead Value and Palmer Square positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smead Value 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 Smead Value 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.