Correlation Between Mutual Of and Principal Lifetime

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

By analyzing existing cross correlation between Mutual Of America and Principal Lifetime 2050, you can compare the effects of market volatilities on Mutual Of and Principal Lifetime 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 Mutual Of with a short position of Principal Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mutual Of and Principal Lifetime.

Diversification Opportunities for Mutual Of and Principal Lifetime

0.78

Correlation Coefficient

Mutual Of  Principal Lifetime

Poor diversification

The 3 months correlation between Mutual and Principal is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Mutual Of America and Principal Lifetime 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Lifetime 2050 and Mutual Of 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 Mutual Of America are associated (or correlated) with Principal Lifetime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Lifetime 2050 has no effect on the direction of Mutual Of i.e., Mutual Of and Principal Lifetime go up and down completely randomly.

Pair Corralation between Mutual Of and Principal Lifetime

Assuming the 90 days horizon Mutual Of is expected to generate 1.45 times less return on investment than Principal Lifetime. In addition to that, Mutual Of is 1.53 times more volatile than Principal Lifetime 2050. It trades about 0.02 of its total potential returns per unit of risk. Principal Lifetime 2050 is currently generating about 0.05 per unit of volatility. If you would invest  1,380  in Principal Lifetime 2050 on October 6, 2024 and sell it today you would earn a total of  251.00  from holding Principal Lifetime 2050 or generate 18.19% return on investment over 90 days.

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

Mutual Of America  vs.  Principal Lifetime 2050

Mutual Of America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mutual Of America has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Mutual Of is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Principal Lifetime 2050

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Principal Lifetime 2050 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward-looking indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Mutual Of and Principal Lifetime

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

The idea behind Mutual Of America and Principal Lifetime 2050 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.