Correlation Between Principal Financial and Aflac Incorporated
Can any of the company-specific risk be diversified away by investing in both Principal Financial and Aflac Incorporated 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 Aflac Incorporated 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 Aflac Incorporated, you can compare the effects of market volatilities on Principal Financial and Aflac Incorporated 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 Aflac Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Financial and Aflac Incorporated.
Diversification Opportunities for Principal Financial and Aflac Incorporated
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Principal and Aflac is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Principal Financial Group and Aflac Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aflac Incorporated 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 Aflac Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aflac Incorporated has no effect on the direction of Principal Financial i.e., Principal Financial and Aflac Incorporated go up and down completely randomly.
Pair Corralation between Principal Financial and Aflac Incorporated
Considering the 90-day investment horizon Principal Financial Group is expected to under-perform the Aflac Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, Principal Financial Group is 1.26 times less risky than Aflac Incorporated. The stock trades about -0.27 of its potential returns per unit of risk. The Aflac Incorporated is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 8,562 in Aflac Incorporated on January 27, 2024 and sell it today you would lose (189.00) from holding Aflac Incorporated or give up 2.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Principal Financial Group vs. Aflac Incorporated
Performance |
| Timeline |
| Principal Financial |
| Aflac Incorporated |
Principal Financial and Aflac Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Principal Financial and Aflac Incorporated
The main advantage of trading using opposite Principal Financial and Aflac Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Financial position performs unexpectedly, Aflac Incorporated 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 Aflac Incorporated will offset losses from the drop in Aflac Incorporated'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 |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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