Correlation Between Principal Lifetime and International Equity
Can any of the company-specific risk be diversified away by investing in both Principal Lifetime and International Equity 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 Lifetime and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Principal Lifetime 2050 and International Equity Index, you can compare the effects of market volatilities on Principal Lifetime and International Equity 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 Lifetime with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Lifetime and International Equity.
Diversification Opportunities for Principal Lifetime and International Equity
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Principal and International is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Principal Lifetime 2050 and International Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Principal Lifetime 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 Lifetime 2050 are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Principal Lifetime i.e., Principal Lifetime and International Equity go up and down completely randomly.
Pair Corralation between Principal Lifetime and International Equity
Assuming the 90 days horizon Principal Lifetime 2050 is expected to generate 0.71 times more return on investment than International Equity. However, Principal Lifetime 2050 is 1.4 times less risky than International Equity. It trades about 0.33 of its potential returns per unit of risk. International Equity Index is currently generating about -0.16 per unit of risk. If you would invest 1,728 in Principal Lifetime 2050 on September 3, 2024 and sell it today you would earn a total of 69.00 from holding Principal Lifetime 2050 or generate 3.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 85.0% |
| Values | Daily Returns |
Principal Lifetime 2050 vs. International Equity Index
Performance |
| Timeline |
| Principal Lifetime 2050 |
| International Equity |
Principal Lifetime and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Principal Lifetime and International Equity
The main advantage of trading using opposite Principal Lifetime and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Lifetime position performs unexpectedly, International Equity 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 International Equity will offset losses from the drop in International Equity's long position.| Principal Lifetime vs. 1919 Financial Services | Principal Lifetime vs. Prudential Financial Services | Principal Lifetime vs. Royce Global Financial | Principal Lifetime vs. Goldman Sachs Financial |
| International Equity vs. Fidelity Sai Convertible | International Equity vs. Virtus Convertible | International Equity vs. Rationalpier 88 Convertible | International Equity vs. Absolute Convertible Arbitrage |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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