Correlation Between Principal and Pacer Financial

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

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

Diversification Opportunities for Principal and Pacer Financial

0.72

Correlation Coefficient

Principal  Pacer Financial

Poor diversification

The 3 months correlation between Principal and Pacer is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Principal and Pacer Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Financial and Principal 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 Principal are associated (or correlated) with Pacer Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Financial has no effect on the direction of Principal i.e., Principal and Pacer Financial go up and down completely randomly.

Pair Corralation between Principal and Pacer Financial

If you would invest  4,003  in Pacer Financial on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Pacer Financial or generate 0.0% return on investment over 90 days.

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

Principal  vs.  Pacer Financial

Principal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Principal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Principal is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pacer Financial

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Pacer Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pacer Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Principal and Pacer Financial

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

The idea behind Principal and Pacer Financial 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.