Correlation Between Gates Industrial and Palomar Holdings

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

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

Diversification Opportunities for Gates Industrial and Palomar Holdings

-0.64

Correlation Coefficient

Gates Industrial  Palomar Holdings

Excellent diversification

The 3 months correlation between Gates and Palomar is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Gates Industrial and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings and Gates Industrial 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 Gates Industrial 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 Gates Industrial i.e., Gates Industrial and Palomar Holdings go up and down completely randomly.

Pair Corralation between Gates Industrial and Palomar Holdings

Given the investment horizon of 90 days Gates Industrial is expected to generate 0.76 times more return on investment than Palomar Holdings. However, Gates Industrial is 1.31 times less risky than Palomar Holdings. It trades about 0.21 of its potential returns per unit of risk. Palomar Holdings is currently generating about -0.14 per unit of risk. If you would invest  2,000  in Gates Industrial on May 3, 2025 and sell it today you would earn a total of  434.00  from holding Gates Industrial or generate 21.7% return on investment over 90 days.

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

Gates Industrial  vs.  Palomar Holdings

Gates Industrial

Risk-Adjusted Performance

Good

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

Palomar Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Palomar Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in September 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Gates Industrial and Palomar Holdings

The main advantage of trading using opposite Gates Industrial and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gates Industrial 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 Gates Industrial 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..