Correlation Between Crowdstrike Holdings and Palantir TechnologiesInc

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

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

Diversification Opportunities for Crowdstrike Holdings and Palantir TechnologiesInc

0.68

Correlation Coefficient

Crowdstrike Holdings  Palantir TechnologiesInc

Poor diversification

The 3 months correlation between Crowdstrike and Palantir is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Crowdstrike Holdings and Palantir TechnologiesInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palantir TechnologiesInc and Crowdstrike Holdings 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 Crowdstrike Holdings are associated (or correlated) with Palantir TechnologiesInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palantir TechnologiesInc has no effect on the direction of Crowdstrike Holdings i.e., Crowdstrike Holdings and Palantir TechnologiesInc go up and down completely randomly.

Pair Corralation between Crowdstrike Holdings and Palantir TechnologiesInc

Given the investment horizon of 90 days Crowdstrike Holdings is expected to generate 1.01 times more return on investment than Palantir TechnologiesInc. However, Crowdstrike Holdings is 1.01 times more volatile than Palantir TechnologiesInc. It trades about -0.05 of its potential returns per unit of risk. Palantir TechnologiesInc is currently generating about -0.07 per unit of risk. If you would invest  31,381  in Crowdstrike Holdings on February 1, 2024 and sell it today you would lose (2,127) from holding Crowdstrike Holdings or give up 6.78% of portfolio value over 90 days.

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

Crowdstrike Holdings  vs.  Palantir TechnologiesInc

Crowdstrike Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crowdstrike Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Crowdstrike Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Palantir TechnologiesInc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir TechnologiesInc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Palantir TechnologiesInc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crowdstrike Holdings and Palantir TechnologiesInc

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

The idea behind Crowdstrike Holdings and Palantir TechnologiesInc 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 Global Correlations module to find global opportunities by holding instruments from different markets.