Correlation Between Federated Investors and Principal Financial
Can any of the company-specific risk be diversified away by investing in both Federated Investors and Principal Financial 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 Federated Investors and Principal Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Investors B and Principal Financial Group, you can compare the effects of market volatilities on Federated Investors and Principal Financial 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 Federated Investors with a short position of Principal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Investors and Principal Financial.
Diversification Opportunities for Federated Investors and Principal Financial
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federated and Principal is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Federated Investors B and Principal Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Financial and Federated Investors 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 Federated Investors B are associated (or correlated) with Principal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Financial has no effect on the direction of Federated Investors i.e., Federated Investors and Principal Financial go up and down completely randomly.
Pair Corralation between Federated Investors and Principal Financial
Considering the 90-day investment horizon Federated Investors B is expected to generate 0.96 times more return on investment than Principal Financial. However, Federated Investors B is 1.04 times less risky than Principal Financial. It trades about 0.12 of its potential returns per unit of risk. Principal Financial Group is currently generating about 0.06 per unit of risk. If you would invest 3,007 in Federated Investors B on September 2, 2024 and sell it today you would earn a total of 1,268 from holding Federated Investors B or generate 42.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Investors B vs. Principal Financial Group
Performance |
| Timeline |
| Federated Investors |
| Principal Financial |
Federated Investors and Principal Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Investors and Principal Financial
The main advantage of trading using opposite Federated Investors and Principal Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Investors position performs unexpectedly, Principal Financial 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 Financial will offset losses from the drop in Principal Financial's long position.| Federated Investors vs. Federated Premier Municipal | Federated Investors vs. Blackrock Muniyield | Federated Investors vs. Diamond Hill Investment | Federated Investors vs. NXG NextGen Infrastructure |
| Principal Financial vs. State Street Corp | Principal Financial vs. Bank of New | Principal Financial vs. SEI Investments | Principal Financial vs. Affiliated Managers Group |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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