Correlation Between Principal Lifetime and Pace Mortgage

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

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

Diversification Opportunities for Principal Lifetime and Pace Mortgage

-0.11

Correlation Coefficient

Principal Lifetime  Pace Mortgage

Good diversification

The 3 months correlation between Principal and Pace is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Principal Lifetime Hybrid and Pace Mortgage Backed Securitie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Mortgage Backed and Principal Lifetime 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 Lifetime Hybrid are associated (or correlated) with Pace Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Mortgage Backed has no effect on the direction of Principal Lifetime i.e., Principal Lifetime and Pace Mortgage go up and down completely randomly.

Pair Corralation between Principal Lifetime and Pace Mortgage

If you would invest  1,015  in Pace Mortgage Backed Securities on December 29, 2024 and sell it today you would earn a total of  0.00  from holding Pace Mortgage Backed Securities or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	24.19%
Values	Daily Returns

Principal Lifetime Hybrid  vs.  Pace Mortgage Backed Securitie

Principal Lifetime Hybrid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Principal Lifetime Hybrid has generated negative risk-adjusted returns adding no value to fund investors. 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.

Pace Mortgage Backed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pace Mortgage Backed Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pace Mortgage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Principal Lifetime and Pace Mortgage

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

The idea behind Principal Lifetime Hybrid and Pace Mortgage Backed Securities 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 Transaction History module to view history of all your transactions and understand their impact on performance.