Correlation Between Applied Finance and Palm Valley
Can any of the company-specific risk be diversified away by investing in both Applied Finance and Palm Valley 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 Applied Finance and Palm Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Palm Valley Capital, you can compare the effects of market volatilities on Applied Finance and Palm Valley 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 Applied Finance with a short position of Palm Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Palm Valley.
Diversification Opportunities for Applied Finance and Palm Valley
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Applied and Palm is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Palm Valley Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palm Valley Capital and Applied Finance 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 Applied Finance Explorer are associated (or correlated) with Palm Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palm Valley Capital has no effect on the direction of Applied Finance i.e., Applied Finance and Palm Valley go up and down completely randomly.
Pair Corralation between Applied Finance and Palm Valley
Assuming the 90 days horizon Applied Finance Explorer is expected to generate 3.28 times more return on investment than Palm Valley. However, Applied Finance is 3.28 times more volatile than Palm Valley Capital. It trades about 0.19 of its potential returns per unit of risk. Palm Valley Capital is currently generating about 0.11 per unit of risk. If you would invest 2,105 in Applied Finance Explorer on June 3, 2025 and sell it today you would earn a total of 276.00 from holding Applied Finance Explorer or generate 13.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Finance Explorer vs. Palm Valley Capital
Performance |
| Timeline |
| Applied Finance Explorer |
| Palm Valley Capital |
Applied Finance and Palm Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Palm Valley
The main advantage of trading using opposite Applied Finance and Palm Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance position performs unexpectedly, Palm Valley 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 Palm Valley will offset losses from the drop in Palm Valley's long position.| Applied Finance vs. Vanguard Small Cap Value | Applied Finance vs. Vanguard Small Cap Value | Applied Finance vs. Us Small Cap | Applied Finance vs. Us Targeted Value |
| Palm Valley vs. Vanguard Small Cap Value | Palm Valley vs. Vanguard Small Cap Value | Palm Valley vs. Us Small Cap | Palm Valley vs. Us Targeted Value |
Check out your portfolio center.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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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