Correlation Between Strategic Asset and Principal Lifetime

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

By analyzing existing cross correlation between Strategic Asset Management and Principal Lifetime 2050, you can compare the effects of market volatilities on Strategic Asset 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 Strategic Asset with a short position of Principal Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Asset and Principal Lifetime.

Diversification Opportunities for Strategic Asset and Principal Lifetime

0.42

Correlation Coefficient

Strategic Asset  Principal Lifetime

Very weak diversification

The 3 months correlation between Strategic and Principal is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Asset Management and Principal Lifetime 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Lifetime 2050 and Strategic Asset 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 Strategic Asset Management 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 2050 has no effect on the direction of Strategic Asset i.e., Strategic Asset and Principal Lifetime go up and down completely randomly.

Pair Corralation between Strategic Asset and Principal Lifetime

Assuming the 90 days horizon Strategic Asset is expected to generate 3.32 times less return on investment than Principal Lifetime. But when comparing it to its historical volatility, Strategic Asset Management is 2.42 times less risky than Principal Lifetime. It trades about 0.11 of its potential returns per unit of risk. Principal Lifetime 2050 is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,698  in Principal Lifetime 2050 on September 2, 2024 and sell it today you would earn a total of  99.00  from holding Principal Lifetime 2050 or generate 5.83% return on investment over 90 days.

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

Strategic Asset Management  vs.  Principal Lifetime 2050

Strategic Asset Mana

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Asset Management are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Strategic Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Principal Lifetime 2050

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Lifetime 2050 are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking 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 Strategic Asset and Principal Lifetime

The main advantage of trading using opposite Strategic Asset and Principal Lifetime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Asset 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 Strategic Asset Management and Principal Lifetime 2050 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.