Correlation Between American Funds and Principal Lifetime
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Principal Lifetime into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2035 and Principal Lifetime Hybrid, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Principal Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Principal Lifetime.
Diversification Opportunities for American Funds and Principal Lifetime
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between AMERICAN and Principal is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2035 and Principal Lifetime Hybrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Lifetime Hybrid and American Funds 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 American Funds 2035 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 Hybrid has no effect on the direction of American Funds i.e., American Funds and Principal Lifetime go up and down completely randomly.
Pair Corralation between American Funds and Principal Lifetime
Assuming the 90 days horizon American Funds 2035 is expected to generate 0.95 times more return on investment than Principal Lifetime. However, American Funds 2035 is 1.05 times less risky than Principal Lifetime. It trades about 0.11 of its potential returns per unit of risk. Principal Lifetime Hybrid is currently generating about 0.1 per unit of risk. If you would invest 1,625 in American Funds 2035 on September 4, 2024 and sell it today you would earn a total of 394.00 from holding American Funds 2035 or generate 24.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
American Funds 2035 vs. Principal Lifetime Hybrid
Performance |
| Timeline |
| American Funds 2035 |
| Principal Lifetime Hybrid |
American Funds and Principal Lifetime Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Principal Lifetime
The main advantage of trading using opposite American Funds and Principal Lifetime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Transamerica Financial Life | American Funds vs. Icon Financial Fund | American Funds vs. Vanguard Financials Index | American Funds vs. Prudential Financial Services |
| Principal Lifetime vs. T Rowe Price | Principal Lifetime vs. Rbb Fund | Principal Lifetime vs. Commonwealth Global Fund | Principal Lifetime vs. T Rowe Price |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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