Correlation Between Principal Financial and Citizens
Can any of the company-specific risk be diversified away by investing in both Principal Financial and Citizens 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 Citizens 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 Citizens, you can compare the effects of market volatilities on Principal Financial and Citizens 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 Citizens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Financial and Citizens.
Diversification Opportunities for Principal Financial and Citizens
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Principal and Citizens is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Principal Financial Group and Citizens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens 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 Citizens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens has no effect on the direction of Principal Financial i.e., Principal Financial and Citizens go up and down completely randomly.
Pair Corralation between Principal Financial and Citizens
Considering the 90-day investment horizon Principal Financial Group is expected to generate 0.34 times more return on investment than Citizens. However, Principal Financial Group is 2.93 times less risky than Citizens. It trades about 0.04 of its potential returns per unit of risk. Citizens is currently generating about -0.14 per unit of risk. If you would invest 7,858 in Principal Financial Group on January 20, 2024 and sell it today you would earn a total of 186.00 from holding Principal Financial Group or generate 2.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Principal Financial Group vs. Citizens
Performance |
| Timeline |
| Principal Financial |
| Citizens |
Principal Financial and Citizens Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Principal Financial and Citizens
The main advantage of trading using opposite Principal Financial and Citizens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Financial position performs unexpectedly, Citizens 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 Citizens will offset losses from the drop in Citizens' 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 |
| Citizens vs. Vericity | Citizens vs. CNO Financial Group | Citizens vs. National Western Life | Citizens vs. Brighthouse Financial |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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