Correlation Between First Trust and Palantir Yield

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

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

Diversification Opportunities for First Trust and Palantir Yield

0.87

Correlation Coefficient

First Trust  Palantir Yield

Very poor diversification

The 3 months correlation between First and Palantir is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and Palantir Yield Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palantir Yield Shares and First Trust 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 First Trust Indxx are associated (or correlated) with Palantir Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palantir Yield Shares has no effect on the direction of First Trust i.e., First Trust and Palantir Yield go up and down completely randomly.

Pair Corralation between First Trust and Palantir Yield

Assuming the 90 days trading horizon First Trust is expected to generate 3.29 times less return on investment than Palantir Yield. But when comparing it to its historical volatility, First Trust Indxx is 2.95 times less risky than Palantir Yield. It trades about 0.22 of its potential returns per unit of risk. Palantir Yield Shares is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,540  in Palantir Yield Shares on April 20, 2025 and sell it today you would earn a total of  1,091  from holding Palantir Yield Shares or generate 70.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

First Trust Indxx  vs.  Palantir Yield Shares

First Trust Indxx

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Indxx are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, First Trust displayed solid returns over the last few months and may actually be approaching a breakup point.

Palantir Yield Shares

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Yield Shares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Palantir Yield exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Palantir Yield

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

The idea behind First Trust Indxx and Palantir Yield Shares 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.