Correlation Between Principal Lifetime and The National

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

By analyzing existing cross correlation between Principal Lifetime 2060 and The National Tax Free, you can compare the effects of market volatilities on Principal Lifetime and The National 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 The National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Lifetime and The National.

Diversification Opportunities for Principal Lifetime and The National

-0.18

Correlation Coefficient

Principal Lifetime  The National

Good diversification

The 3 months correlation between Principal and The is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Principal Lifetime 2060 and The National Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Tax 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 2060 are associated (or correlated) with The National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Tax has no effect on the direction of Principal Lifetime i.e., Principal Lifetime and The National go up and down completely randomly.

Pair Corralation between Principal Lifetime and The National

Assuming the 90 days horizon Principal Lifetime 2060 is expected to generate 4.06 times more return on investment than The National. However, Principal Lifetime is 4.06 times more volatile than The National Tax Free. It trades about 0.06 of its potential returns per unit of risk. The National Tax Free is currently generating about 0.06 per unit of risk. If you would invest  1,507  in Principal Lifetime 2060 on September 4, 2024 and sell it today you would earn a total of  383.00  from holding Principal Lifetime 2060 or generate 25.41% return on investment over 90 days.

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

Principal Lifetime 2060  vs.  The National Tax Free

Principal Lifetime 2060

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Lifetime 2060 are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. 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.

National Tax

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The National Tax Free are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, The National 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 The National

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

The idea behind Principal Lifetime 2060 and The National Tax Free 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.