Correlation Between Ping An and Palomar Holdings

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

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

Diversification Opportunities for Ping An and Palomar Holdings

0.25

Correlation Coefficient

Ping An  Palomar Holdings

Modest diversification

The 3 months correlation between Ping and Palomar is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings and Ping An 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 Ping An Insurance are associated (or correlated) with Palomar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palomar Holdings has no effect on the direction of Ping An i.e., Ping An and Palomar Holdings go up and down completely randomly.

Pair Corralation between Ping An and Palomar Holdings

Assuming the 90 days horizon Ping An Insurance is expected to under-perform the Palomar Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Ping An Insurance is 1.05 times less risky than Palomar Holdings. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Palomar Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,008  in Palomar Holdings on January 24, 2024 and sell it today you would earn a total of  1,976  from holding Palomar Holdings or generate 32.89% return on investment over 90 days.

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

Ping An Insurance  vs.  Palomar Holdings

Ping An Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ping An Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Ping An is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Palomar Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, Palomar Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Palomar Holdings

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

The idea behind Ping An Insurance and Palomar Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.