Correlation Between Carlyle and Principal Real

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

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

Diversification Opportunities for Carlyle and Principal Real

-0.58

Correlation Coefficient

Carlyle  Principal Real

Excellent diversification

The 3 months correlation between Carlyle and Principal is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Principal Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Real Estate and Carlyle 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 Carlyle Group are associated (or correlated) with Principal Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Real Estate has no effect on the direction of Carlyle i.e., Carlyle and Principal Real go up and down completely randomly.

Pair Corralation between Carlyle and Principal Real

Allowing for the 90-day total investment horizon Carlyle Group is expected to generate 3.81 times more return on investment than Principal Real. However, Carlyle is 3.81 times more volatile than Principal Real Estate. It trades about 0.14 of its potential returns per unit of risk. Principal Real Estate is currently generating about 0.1 per unit of risk. If you would invest  4,872  in Carlyle Group on September 5, 2024 and sell it today you would earn a total of  376.00  from holding Carlyle Group or generate 7.72% return on investment over 90 days.

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

Carlyle Group  vs.  Principal Real Estate

Carlyle Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

Principal Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Principal Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Principal Real is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Carlyle and Principal Real

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

The idea behind Carlyle Group and Principal Real Estate 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.