Correlation Between Principal Real and Lazard Global

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

By analyzing existing cross correlation between Principal Real Estate and Lazard Global Total, you can compare the effects of market volatilities on Principal Real and Lazard Global 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 Real with a short position of Lazard Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Real and Lazard Global.

Diversification Opportunities for Principal Real and Lazard Global

0.6

Correlation Coefficient

Principal Real  Lazard Global

Poor diversification

The 3 months correlation between Principal and Lazard is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Principal Real Estate and Lazard Global Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lazard Global Total and Principal Real 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 Real Estate are associated (or correlated) with Lazard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lazard Global Total has no effect on the direction of Principal Real i.e., Principal Real and Lazard Global go up and down completely randomly.

Pair Corralation between Principal Real and Lazard Global

Considering the 90-day investment horizon Principal Real is expected to generate 1.33 times less return on investment than Lazard Global. But when comparing it to its historical volatility, Principal Real Estate is 1.59 times less risky than Lazard Global. It trades about 0.02 of its potential returns per unit of risk. Lazard Global Total is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,661  in Lazard Global Total on September 3, 2024 and sell it today you would earn a total of  10.00  from holding Lazard Global Total or generate 0.6% return on investment over 90 days.

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

Principal Real Estate  vs.  Lazard Global Total

Principal Real Estate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Real Estate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Principal Real is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Lazard Global Total

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lazard Global Total are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong technical and fundamental indicators, Lazard Global is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Principal Real and Lazard Global

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

The idea behind Principal Real Estate and Lazard Global Total 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.