Can any of the company-specific risk be diversified away by investing in both Jackson Financial and Primerica 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 Jackson Financial and Primerica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jackson Financial and Primerica, you can compare the effects of market volatilities on Jackson Financial and Primerica 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 Jackson Financial with a short position of Primerica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jackson Financial and Primerica.
Diversification Opportunities for Jackson Financial and Primerica
The 3 months correlation between Jackson and Primerica is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Jackson Financial and Primerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primerica and Jackson 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 Jackson Financial are associated (or correlated) with Primerica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primerica has no effect on the direction of Jackson Financial i.e., Jackson Financial and Primerica go up and down completely randomly.
Pair Corralation between Jackson Financial and Primerica
Considering the 90-day investment horizon Jackson Financial is expected to generate 1.16 times more return on investment than Primerica. However, Jackson Financial is 1.16 times more volatile than Primerica. It trades about 0.24 of its potential returns per unit of risk. Primerica is currently generating about -0.1 per unit of risk. If you would invest 5,782 in Jackson Financial on March 6, 2024 and sell it today you would earn a total of 1,764 from holding Jackson Financial or generate 30.51% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Jackson Financial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Jackson Financial displayed solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days Primerica has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.