Correlation Between Principal Exchange and AB Core

Can any of the company-specific risk be diversified away by investing in both Principal Exchange and AB Core 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 AB Core 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 AB Core Plus, you can compare the effects of market volatilities on Principal Exchange and AB Core 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 AB Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Exchange and AB Core.

Diversification Opportunities for Principal Exchange and AB Core

0.98

Correlation Coefficient

Principal Exchange  AB Core

Almost no diversification

The 3 months correlation between Principal and CPLS is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Principal Exchange Traded Fund and AB Core Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Core Plus 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 AB Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Core Plus has no effect on the direction of Principal Exchange i.e., Principal Exchange and AB Core go up and down completely randomly.

Pair Corralation between Principal Exchange and AB Core

Allowing for the 90-day total investment horizon Principal Exchange Traded Funds is expected to generate 1.12 times more return on investment than AB Core. However, Principal Exchange is 1.12 times more volatile than AB Core Plus. It trades about -0.02 of its potential returns per unit of risk. AB Core Plus is currently generating about -0.05 per unit of risk. If you would invest  2,102  in Principal Exchange Traded Funds on September 4, 2024 and sell it today you would lose (10.00) from holding Principal Exchange Traded Funds or give up 0.48% of portfolio value over 90 days.

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

Principal Exchange Traded Fund  vs.  AB Core Plus

Principal Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Principal Exchange Traded Funds has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

AB Core Plus

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Principal Exchange and AB Core

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

The idea behind Principal Exchange Traded Funds and AB Core Plus 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.