Correlation Between Large Cap and Palmer Square

Can any of the company-specific risk be diversified away by investing in both Large Cap and Palmer Square 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 Large Cap and Palmer Square into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Large Cap E and Palmer Square Ssi, you can compare the effects of market volatilities on Large Cap and Palmer Square 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 Large Cap with a short position of Palmer Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Palmer Square.

Diversification Opportunities for Large Cap and Palmer Square

0.91

Correlation Coefficient

Large Cap  Palmer Square

Almost no diversification

The 3 months correlation between Large and Palmer is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap E and Palmer Square Ssi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palmer Square Ssi and Large Cap 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 Large Cap E are associated (or correlated) with Palmer Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palmer Square Ssi has no effect on the direction of Large Cap i.e., Large Cap and Palmer Square go up and down completely randomly.

Pair Corralation between Large Cap and Palmer Square

Assuming the 90 days horizon Large Cap E is expected to generate 11.4 times more return on investment than Palmer Square. However, Large Cap is 11.4 times more volatile than Palmer Square Ssi. It trades about 0.13 of its potential returns per unit of risk. Palmer Square Ssi is currently generating about 0.5 per unit of risk. If you would invest  2,092  in Large Cap E on July 23, 2025 and sell it today you would earn a total of  139.00  from holding Large Cap E or generate 6.64% return on investment over 90 days.

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

Large Cap E  vs.  Palmer Square Ssi

Large Cap E

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap E are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Palmer Square Ssi

Risk-Adjusted Performance

High

Compared to the overall equity markets, risk-adjusted returns on investments in Palmer Square Ssi are ranked lower than 39 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Palmer Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Large Cap and Palmer Square

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

The idea behind Large Cap E and Palmer Square Ssi 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.