Correlation Between Principal Active and IShares IBoxx
Can any of the company-specific risk be diversified away by investing in both Principal Active and IShares IBoxx 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 Active and IShares IBoxx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Principal Active High and iShares iBoxx Investment, you can compare the effects of market volatilities on Principal Active and IShares IBoxx 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 Active with a short position of IShares IBoxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Active and IShares IBoxx.
Diversification Opportunities for Principal Active and IShares IBoxx
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Principal and IShares is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Principal Active High and iShares iBoxx Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBoxx Investment and Principal Active 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 Active High are associated (or correlated) with IShares IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBoxx Investment has no effect on the direction of Principal Active i.e., Principal Active and IShares IBoxx go up and down completely randomly.
Pair Corralation between Principal Active and IShares IBoxx
Considering the 90-day investment horizon Principal Active High is expected to generate 0.69 times more return on investment than IShares IBoxx. However, Principal Active High is 1.46 times less risky than IShares IBoxx. It trades about 0.16 of its potential returns per unit of risk. iShares iBoxx Investment is currently generating about 0.01 per unit of risk. If you would invest 1,913 in Principal Active High on September 12, 2024 and sell it today you would earn a total of 43.00 from holding Principal Active High or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.62% |
| Values | Daily Returns |
Principal Active High vs. iShares iBoxx Investment
Performance |
| Timeline |
| Principal Active High |
| iShares iBoxx Investment |
Principal Active and IShares IBoxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Principal Active and IShares IBoxx
The main advantage of trading using opposite Principal Active and IShares IBoxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Active position performs unexpectedly, IShares IBoxx 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 IShares IBoxx will offset losses from the drop in IShares IBoxx's long position.| Principal Active vs. SPDR SSgA Income | Principal Active vs. First Trust Income | Principal Active vs. Saba Closed End Funds | Principal Active vs. Xtrackers Short Duration |
| IShares IBoxx vs. American Century STOXX | IShares IBoxx vs. Franklin Liberty Investment | IShares IBoxx vs. Aquagold International | IShares IBoxx vs. Morningstar Unconstrained Allocation |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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