Correlation Between Palantir TechnologiesInc and Paramount Global

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

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

Diversification Opportunities for Palantir TechnologiesInc and Paramount Global

-0.44

Correlation Coefficient

Palantir TechnologiesInc  Paramount Global

Very good diversification

The 3 months correlation between Palantir and Paramount is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Palantir TechnologiesInc and Paramount Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Global and Palantir TechnologiesInc 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 Palantir TechnologiesInc are associated (or correlated) with Paramount Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Global has no effect on the direction of Palantir TechnologiesInc i.e., Palantir TechnologiesInc and Paramount Global go up and down completely randomly.

Pair Corralation between Palantir TechnologiesInc and Paramount Global

Given the investment horizon of 90 days Palantir TechnologiesInc is expected to under-perform the Paramount Global. In addition to that, Palantir TechnologiesInc is 2.35 times more volatile than Paramount Global. It trades about -0.28 of its total potential returns per unit of risk. Paramount Global is currently generating about 0.45 per unit of volatility. If you would invest  1,341  in Paramount Global on January 25, 2024 and sell it today you would earn a total of  33.00  from holding Paramount Global or generate 2.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	27.27%
Values	Daily Returns

Palantir TechnologiesInc  vs.  Paramount Global

Palantir TechnologiesInc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir TechnologiesInc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Palantir TechnologiesInc reported solid returns over the last few months and may actually be approaching a breakup point.

Paramount Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paramount Global has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Preferred Stock's basic indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Palantir TechnologiesInc and Paramount Global

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

The idea behind Palantir TechnologiesInc and Paramount Global 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.