Correlation Between Principal Financial and State Street
Can any of the company-specific risk be diversified away by investing in both Principal Financial and State Street 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 State Street 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 State Street Corp, you can compare the effects of market volatilities on Principal Financial and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Financial and State Street.
Diversification Opportunities for Principal Financial and State Street
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Principal and State is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Principal Financial Group and State Street Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Corp 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Corp has no effect on the direction of Principal Financial i.e., Principal Financial and State Street go up and down completely randomly.
Pair Corralation between Principal Financial and State Street
Considering the 90-day investment horizon Principal Financial is expected to generate 1.96 times less return on investment than State Street. In addition to that, Principal Financial is 1.08 times more volatile than State Street Corp. It trades about 0.11 of its total potential returns per unit of risk. State Street Corp is currently generating about 0.22 per unit of volatility. If you would invest 9,298 in State Street Corp on August 27, 2024 and sell it today you would earn a total of 581.00 from holding State Street Corp or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Principal Financial Group vs. State Street Corp
Performance |
| Timeline |
| Principal Financial |
| State Street Corp |
Principal Financial and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Principal Financial and State Street
The main advantage of trading using opposite Principal Financial and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Financial position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street'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 |
| State Street vs. Northern Trust | State Street vs. Franklin Resources | State Street vs. Invesco Plc | State Street 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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