Correlation Between IShares Preferred and Principal Spectrum

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

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

Diversification Opportunities for IShares Preferred and Principal Spectrum

0.18

Correlation Coefficient

IShares Preferred  Principal Spectrum

Average diversification

The 3 months correlation between IShares and Principal is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding iShares Preferred and and Principal Spectrum Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Spectrum and IShares Preferred 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 iShares Preferred and are associated (or correlated) with Principal Spectrum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Spectrum has no effect on the direction of IShares Preferred i.e., IShares Preferred and Principal Spectrum go up and down completely randomly.

Pair Corralation between IShares Preferred and Principal Spectrum

Considering the 90-day investment horizon iShares Preferred and is expected to under-perform the Principal Spectrum. In addition to that, IShares Preferred is 2.63 times more volatile than Principal Spectrum Preferred. It trades about -0.02 of its total potential returns per unit of risk. Principal Spectrum Preferred is currently generating about 0.11 per unit of volatility. If you would invest  1,846  in Principal Spectrum Preferred on December 30, 2024 and sell it today you would earn a total of  27.00  from holding Principal Spectrum Preferred or generate 1.46% return on investment over 90 days.

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

iShares Preferred and  vs.  Principal Spectrum Preferred

iShares Preferred

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Preferred and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Principal Spectrum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Spectrum Preferred are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Principal Spectrum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Preferred and Principal Spectrum

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

The idea behind iShares Preferred and and Principal Spectrum Preferred 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.