Correlation Between Principal Financial and Ameriprise Financial

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

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

Diversification Opportunities for Principal Financial and Ameriprise Financial

-0.18

Correlation Coefficient

Principal Financial  Ameriprise Financial

Good diversification

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

Pair Corralation between Principal Financial and Ameriprise Financial

Considering the 90-day investment horizon Principal Financial Group is expected to generate 0.79 times more return on investment than Ameriprise Financial. However, Principal Financial Group is 1.27 times less risky than Ameriprise Financial. It trades about 0.1 of its potential returns per unit of risk. Ameriprise Financial is currently generating about -0.08 per unit of risk. If you would invest  7,653  in Principal Financial Group on December 30, 2024 and sell it today you would earn a total of  653.00  from holding Principal Financial Group or generate 8.53% return on investment over 90 days.

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

Principal Financial Group  vs.  Ameriprise Financial

Principal Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Financial Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Principal Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ameriprise Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ameriprise Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Principal Financial and Ameriprise Financial

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

The idea behind Principal Financial Group and Ameriprise Financial 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.