Correlation Between Princeton Capital and Standard Life

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

By analyzing existing cross correlation between Princeton Capital and Standard Life Aberdeen, you can compare the effects of market volatilities on Princeton Capital and Standard Life 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 Princeton Capital with a short position of Standard Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Princeton Capital and Standard Life.

Diversification Opportunities for Princeton Capital and Standard Life

0.04

Correlation Coefficient

Princeton Capital  Standard Life

Significant diversification

The 3 months correlation between Princeton and Standard is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Princeton Capital and Standard Life Aberdeen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Life Aberdeen and Princeton Capital 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 Princeton Capital are associated (or correlated) with Standard Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Life Aberdeen has no effect on the direction of Princeton Capital i.e., Princeton Capital and Standard Life go up and down completely randomly.

Pair Corralation between Princeton Capital and Standard Life

Given the investment horizon of 90 days Princeton Capital is expected to generate 9.19 times less return on investment than Standard Life. In addition to that, Princeton Capital is 2.26 times more volatile than Standard Life Aberdeen. It trades about 0.01 of its total potential returns per unit of risk. Standard Life Aberdeen is currently generating about 0.16 per unit of volatility. If you would invest  706.00  in Standard Life Aberdeen on December 21, 2024 and sell it today you would earn a total of  199.00  from holding Standard Life Aberdeen or generate 28.19% return on investment over 90 days.

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

Princeton Capital  vs.  Standard Life Aberdeen

Princeton Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Princeton Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Princeton Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Standard Life Aberdeen

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Life Aberdeen are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Standard Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Princeton Capital and Standard Life

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

The idea behind Princeton Capital and Standard Life Aberdeen 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.