Correlation Between Principal Exchange and EA Series

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

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

Diversification Opportunities for Principal Exchange and EA Series

0.8

Correlation Coefficient

Principal Exchange  EA Series

Very poor diversification

The 3 months correlation between Principal and BUXX is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Principal Exchange Traded Fund and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust and Principal Exchange 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 Exchange Traded Funds are associated (or correlated) with EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of Principal Exchange i.e., Principal Exchange and EA Series go up and down completely randomly.

Pair Corralation between Principal Exchange and EA Series

Allowing for the 90-day total investment horizon Principal Exchange Traded Funds is expected to generate 2.97 times more return on investment than EA Series. However, Principal Exchange is 2.97 times more volatile than EA Series Trust. It trades about 0.07 of its potential returns per unit of risk. EA Series Trust is currently generating about 0.17 per unit of risk. If you would invest  2,026  in Principal Exchange Traded Funds on December 25, 2024 and sell it today you would earn a total of  31.00  from holding Principal Exchange Traded Funds or generate 1.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Principal Exchange Traded Fund  vs.  EA Series Trust

Principal Exchange

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Exchange Traded Funds are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Principal Exchange is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

EA Series Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EA Series Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, EA Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Principal Exchange and EA Series

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

The idea behind Principal Exchange Traded Funds and EA Series Trust 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.