Correlation Between Principal Financial and Federated Premier
Can any of the company-specific risk be diversified away by investing in both Principal Financial and Federated Premier 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 Financial and Federated Premier into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Principal Financial Group and Federated Premier Municipal, you can compare the effects of market volatilities on Principal Financial and Federated Premier 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 Financial with a short position of Federated Premier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Financial and Federated Premier.
Diversification Opportunities for Principal Financial and Federated Premier
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Principal and Federated is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Principal Financial Group and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier and Principal Financial 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 Financial Group are associated (or correlated) with Federated Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of Principal Financial i.e., Principal Financial and Federated Premier go up and down completely randomly.
Pair Corralation between Principal Financial and Federated Premier
Considering the 90-day investment horizon Principal Financial Group is expected to generate 1.91 times more return on investment than Federated Premier. However, Principal Financial is 1.91 times more volatile than Federated Premier Municipal. It trades about 0.11 of its potential returns per unit of risk. Federated Premier Municipal is currently generating about -0.1 per unit of risk. If you would invest 8,449 in Principal Financial Group on August 28, 2024 and sell it today you would earn a total of 255.00 from holding Principal Financial Group or generate 3.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Principal Financial Group vs. Federated Premier Municipal
Performance |
| Timeline |
| Principal Financial |
| Federated Premier |
Principal Financial and Federated Premier Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Principal Financial and Federated Premier
The main advantage of trading using opposite Principal Financial and Federated Premier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Financial position performs unexpectedly, Federated Premier 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 Federated Premier will offset losses from the drop in Federated Premier's long position.| Principal Financial vs. State Street Corp | Principal Financial vs. Bank of New | Principal Financial vs. SEI Investments | Principal Financial vs. Affiliated Managers Group |
| Federated Premier vs. Dws Strategic Municipal | Federated Premier vs. MFS Investment Grade | Federated Premier vs. Eaton Vance Municipal | Federated Premier vs. DTF Tax Free |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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