Correlation Between Principal Exchange and IShares Preferred

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

By analyzing existing cross correlation between Principal Exchange Traded Funds and iShares Preferred and, you can compare the effects of market volatilities on Principal Exchange and IShares Preferred 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 Exchange with a short position of IShares Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Exchange and IShares Preferred.

Diversification Opportunities for Principal Exchange and IShares Preferred

0.88

Correlation Coefficient

Principal Exchange  IShares Preferred

Very poor diversification

The 3 months correlation between Principal and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Principal Exchange Traded Fund and iShares Preferred and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Preferred and Principal Exchange 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 Exchange Traded Funds are associated (or correlated) with IShares Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Preferred has no effect on the direction of Principal Exchange i.e., Principal Exchange and IShares Preferred go up and down completely randomly.

Pair Corralation between Principal Exchange and IShares Preferred

Given the investment horizon of 90 days Principal Exchange is expected to generate 1.9 times less return on investment than IShares Preferred. But when comparing it to its historical volatility, Principal Exchange Traded Funds is 3.19 times less risky than IShares Preferred. It trades about 0.2 of its potential returns per unit of risk. iShares Preferred and is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,179  in iShares Preferred and on September 1, 2024 and sell it today you would earn a total of  116.00  from holding iShares Preferred and or generate 3.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Principal Exchange Traded Fund  vs.  iShares Preferred and

Principal Exchange

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Exchange Traded Funds are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Principal Exchange is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

iShares Preferred

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Preferred and are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Principal Exchange and IShares Preferred

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

The idea behind Principal Exchange Traded Funds and iShares Preferred and 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.