Correlation Between Principal Real and Lazard Global

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

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

Diversification Opportunities for Principal Real and Lazard Global

0.59

Correlation Coefficient

Principal Real  Lazard Global

Very weak diversification

The 3 months correlation between Principal and Lazard is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Principal Real Estate and Lazard Global Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lazard Global Total and Principal 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 Principal Real Estate are associated (or correlated) with Lazard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lazard Global Total has no effect on the direction of Principal Real i.e., Principal Real and Lazard Global go up and down completely randomly.

Pair Corralation between Principal Real and Lazard Global

Considering the 90-day investment horizon Principal Real Estate is expected to generate 0.66 times more return on investment than Lazard Global. However, Principal Real Estate is 1.51 times less risky than Lazard Global. It trades about 0.02 of its potential returns per unit of risk. Lazard Global Total is currently generating about -0.01 per unit of risk. If you would invest  1,072  in Principal Real Estate on September 4, 2024 and sell it today you would earn a total of  6.00  from holding Principal Real Estate or generate 0.56% return on investment over 90 days.

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

Principal Real Estate  vs.  Lazard Global Total

Principal Real Estate

Risk-Adjusted Performance

1 of 100

Weak

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

Lazard Global Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lazard Global Total has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong technical and fundamental indicators, Lazard Global is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Principal Real and Lazard Global

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

The idea behind Principal Real Estate and Lazard Global Total 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.