Correlation Between Georgia Tax-free and Principal Lifetime

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

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

Diversification Opportunities for Georgia Tax-free and Principal Lifetime

0.64

Correlation Coefficient

Georgia Tax-free  Principal Lifetime

Poor diversification

The 3 months correlation between Georgia and Principal is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Georgia Tax Free Bond 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 Georgia Tax-free 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 Georgia Tax Free Bond 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 Georgia Tax-free i.e., Georgia Tax-free and Principal Lifetime go up and down completely randomly.

Pair Corralation between Georgia Tax-free and Principal Lifetime

Assuming the 90 days horizon Georgia Tax-free is expected to generate 2.75 times less return on investment than Principal Lifetime. But when comparing it to its historical volatility, Georgia Tax Free Bond is 2.02 times less risky than Principal Lifetime. It trades about 0.05 of its potential returns per unit of risk. Principal Lifetime Hybrid is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,116  in Principal Lifetime Hybrid on October 11, 2024 and sell it today you would earn a total of  192.00  from holding Principal Lifetime Hybrid or generate 17.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Georgia Tax Free Bond  vs.  Principal Lifetime Hybrid

Georgia Tax Free

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Georgia Tax Free Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Georgia Tax-free 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

0 of 100

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.

Pair Trading with Georgia Tax-free and Principal Lifetime

The main advantage of trading using opposite Georgia Tax-free and Principal Lifetime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Georgia Tax-free 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 Georgia Tax Free Bond 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.