Correlation Between Princeton Premium and Princeton Adaptive

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

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

Diversification Opportunities for Princeton Premium and Princeton Adaptive

0.69

Correlation Coefficient

Princeton Premium  Princeton Adaptive

Poor diversification

The 3 months correlation between Princeton and Princeton is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Princeton Premium and Princeton Adaptive Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Princeton Adaptive and Princeton Premium 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 Princeton Premium are associated (or correlated) with Princeton Adaptive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Princeton Adaptive has no effect on the direction of Princeton Premium i.e., Princeton Premium and Princeton Adaptive go up and down completely randomly.

Pair Corralation between Princeton Premium and Princeton Adaptive

Assuming the 90 days horizon Princeton Premium is expected to generate 0.38 times more return on investment than Princeton Adaptive. However, Princeton Premium is 2.65 times less risky than Princeton Adaptive. It trades about 0.12 of its potential returns per unit of risk. Princeton Adaptive Premium is currently generating about -0.05 per unit of risk. If you would invest  1,164  in Princeton Premium on September 15, 2024 and sell it today you would earn a total of  12.00  from holding Princeton Premium or generate 1.03% return on investment over 90 days.

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

Princeton Premium  vs.  Princeton Adaptive Premium

Princeton Premium

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Princeton Premium are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Princeton Premium is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Princeton Adaptive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Princeton Adaptive Premium has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Princeton Adaptive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Princeton Premium and Princeton Adaptive

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

The idea behind Princeton Premium and Princeton Adaptive Premium 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.