Correlation Between Equitable Holdings and Principal Financial

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

By analyzing existing cross correlation between Equitable Holdings and Principal Financial Group, you can compare the effects of market volatilities on Equitable Holdings and Principal Financial 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 Equitable Holdings with a short position of Principal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equitable Holdings and Principal Financial.

Diversification Opportunities for Equitable Holdings and Principal Financial

0.26

Correlation Coefficient

Equitable Holdings  Principal Financial

Modest diversification

The 3 months correlation between Equitable and Principal is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Equitable Holdings and Principal Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Financial and Equitable Holdings 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 Equitable Holdings are associated (or correlated) with Principal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Financial has no effect on the direction of Equitable Holdings i.e., Equitable Holdings and Principal Financial go up and down completely randomly.

Pair Corralation between Equitable Holdings and Principal Financial

Assuming the 90 days horizon Equitable Holdings is expected to generate 1.04 times more return on investment than Principal Financial. However, Equitable Holdings is 1.04 times more volatile than Principal Financial Group. It trades about 0.11 of its potential returns per unit of risk. Principal Financial Group is currently generating about -0.04 per unit of risk. If you would invest  3,700  in Equitable Holdings on September 23, 2024 and sell it today you would earn a total of  520.00  from holding Equitable Holdings or generate 14.05% return on investment over 90 days.

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

Equitable Holdings  vs.  Principal Financial Group

Equitable Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equitable Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Equitable Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Principal Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Principal Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Principal Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Equitable Holdings and Principal Financial

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

The idea behind Equitable Holdings and Principal Financial Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.