Correlation Between Affiliated Managers and Principal Financial

Can any of the company-specific risk be diversified away by investing in both Affiliated Managers and Principal Financial 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 Affiliated Managers and Principal Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Affiliated Managers Group and Principal Financial Group, you can compare the effects of market volatilities on Affiliated Managers and Principal Financial 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 Affiliated Managers with a short position of Principal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affiliated Managers and Principal Financial.

Diversification Opportunities for Affiliated Managers and Principal Financial

0.79

Correlation Coefficient

Affiliated Managers  Principal Financial

Poor diversification

The 3 months correlation between Affiliated and Principal is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Managers Group and Principal Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Financial and Affiliated Managers 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 Affiliated Managers Group are associated (or correlated) with Principal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Financial has no effect on the direction of Affiliated Managers i.e., Affiliated Managers and Principal Financial go up and down completely randomly.

Pair Corralation between Affiliated Managers and Principal Financial

Considering the 90-day investment horizon Affiliated Managers Group is expected to generate 0.98 times more return on investment than Principal Financial. However, Affiliated Managers Group is 1.02 times less risky than Principal Financial. It trades about -0.13 of its potential returns per unit of risk. Principal Financial Group is currently generating about -0.24 per unit of risk. If you would invest  16,438  in Affiliated Managers Group on February 2, 2024 and sell it today you would lose (574.00) from holding Affiliated Managers Group or give up 3.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Affiliated Managers Group  vs.  Principal Financial Group

Affiliated Managers

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Affiliated Managers Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating primary indicators, Affiliated Managers may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Principal Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Principal Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Affiliated Managers and Principal Financial

The main advantage of trading using opposite Affiliated Managers and Principal Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affiliated Managers position performs unexpectedly, Principal Financial 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 Financial will offset losses from the drop in Principal Financial's long position.

The idea behind Affiliated Managers Group and Principal Financial Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 CEOs Directory module to screen CEOs from public companies around the world.