Correlation Between Global Real and Principal Lifetime

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

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

Diversification Opportunities for Global Real and Principal Lifetime

0.86

Correlation Coefficient

Global Real  Principal Lifetime

Very poor diversification

The 3 months correlation between Global and Principal is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Global Real Estate and Principal Lifetime Hybrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Lifetime Hybrid and Global Real 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 Global Real Estate 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 Hybrid has no effect on the direction of Global Real i.e., Global Real and Principal Lifetime go up and down completely randomly.

Pair Corralation between Global Real and Principal Lifetime

Assuming the 90 days horizon Global Real Estate is expected to generate 1.85 times more return on investment than Principal Lifetime. However, Global Real is 1.85 times more volatile than Principal Lifetime Hybrid. It trades about 0.03 of its potential returns per unit of risk. Principal Lifetime Hybrid is currently generating about 0.02 per unit of risk. If you would invest  903.00  in Global Real Estate on December 22, 2024 and sell it today you would earn a total of  11.00  from holding Global Real Estate or generate 1.22% return on investment over 90 days.

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

Global Real Estate  vs.  Principal Lifetime Hybrid

Global Real Estate

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Real Estate are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Global Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Principal Lifetime Hybrid

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Lifetime Hybrid are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Principal Lifetime is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Real and Principal Lifetime

The main advantage of trading using opposite Global Real and Principal Lifetime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Real 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 Global Real Estate and Principal Lifetime Hybrid 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.