Correlation Between High Yield and Principal Lifetime
Can any of the company-specific risk be diversified away by investing in both High Yield 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 High Yield and Principal Lifetime into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Fund and Principal Lifetime Hybrid, you can compare the effects of market volatilities on High Yield 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 High Yield with a short position of Principal Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Principal Lifetime.
Diversification Opportunities for High Yield and Principal Lifetime
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between High and Principal is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Fund 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 High Yield 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 High Yield Fund 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 High Yield i.e., High Yield and Principal Lifetime go up and down completely randomly.
Pair Corralation between High Yield and Principal Lifetime
Assuming the 90 days horizon High Yield Fund is expected to under-perform the Principal Lifetime. But the mutual fund apears to be less risky and, when comparing its historical volatility, High Yield Fund is 1.54 times less risky than Principal Lifetime. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Principal Lifetime Hybrid is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,061 in Principal Lifetime Hybrid on August 28, 2024 and sell it today you would earn a total of 9.00 from holding Principal Lifetime Hybrid or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
High Yield Fund vs. Principal Lifetime Hybrid
Performance |
| Timeline |
| High Yield Fund |
| Principal Lifetime Hybrid |
High Yield and Principal Lifetime Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Yield and Principal Lifetime
The main advantage of trading using opposite High Yield and Principal Lifetime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield 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.| High Yield vs. Strategic Asset Management | High Yield vs. Strategic Asset Management | High Yield vs. Strategic Asset Management | High Yield vs. Strategic Asset Management |
| Principal Lifetime vs. Strategic Asset Management | Principal Lifetime vs. Strategic Asset Management | Principal Lifetime vs. Strategic Asset Management | Principal Lifetime vs. Strategic Asset Management |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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