Correlation Between OFS Credit and Principal Financial

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

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

Diversification Opportunities for OFS Credit and Principal Financial

-0.38

Correlation Coefficient

OFS Credit  Principal Financial

Very good diversification

The 3 months correlation between OFS and Principal is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding OFS Credit and Principal Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Financial and OFS Credit 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 OFS Credit are associated (or correlated) with Principal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Financial has no effect on the direction of OFS Credit i.e., OFS Credit and Principal Financial go up and down completely randomly.

Pair Corralation between OFS Credit and Principal Financial

Assuming the 90 days horizon OFS Credit is expected to generate 0.3 times more return on investment than Principal Financial. However, OFS Credit is 3.32 times less risky than Principal Financial. It trades about -0.15 of its potential returns per unit of risk. Principal Financial Group is currently generating about -0.28 per unit of risk. If you would invest  2,389  in OFS Credit on September 22, 2024 and sell it today you would lose (31.00) from holding OFS Credit or give up 1.3% of portfolio value over 90 days.

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

OFS Credit  vs.  Principal Financial Group

OFS Credit

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in OFS Credit are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, OFS Credit is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Principal Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Principal Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with OFS Credit and Principal Financial

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

The idea behind OFS Credit and Principal Financial Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.