Correlation Between Palomar Holdings and Party City

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

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

Diversification Opportunities for Palomar Holdings and Party City

-0.73

Correlation Coefficient

Palomar Holdings  Party City

Pay attention - limited upside

The 3 months correlation between Palomar and Party is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and Party City Holdco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Party City Holdco and Palomar 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 Palomar Holdings are associated (or correlated) with Party City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Party City Holdco has no effect on the direction of Palomar Holdings i.e., Palomar Holdings and Party City go up and down completely randomly.

Pair Corralation between Palomar Holdings and Party City

If you would invest  5.51  in Party City Holdco on February 5, 2024 and sell it today you would earn a total of  0.00  from holding Party City Holdco or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.55%
Values	Daily Returns

Palomar Holdings  vs.  Party City Holdco

Palomar Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Palomar Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Party City Holdco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Party City Holdco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Party City is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Palomar Holdings and Party City

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

The idea behind Palomar Holdings and Party City Holdco 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.