Correlation Between Principal Financial and CNO Financial
Can any of the company-specific risk be diversified away by investing in both Principal Financial and CNO 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 Principal Financial and CNO Financial 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 CNO Financial Group, you can compare the effects of market volatilities on Principal Financial and CNO 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 Principal Financial with a short position of CNO Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Financial and CNO Financial.
Diversification Opportunities for Principal Financial and CNO Financial
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Principal and CNO is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Principal Financial Group and CNO Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNO Financial Group 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 CNO Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNO Financial Group has no effect on the direction of Principal Financial i.e., Principal Financial and CNO Financial go up and down completely randomly.
Pair Corralation between Principal Financial and CNO Financial
Considering the 90-day investment horizon Principal Financial Group is expected to generate 0.74 times more return on investment than CNO Financial. However, Principal Financial Group is 1.35 times less risky than CNO Financial. It trades about -0.18 of its potential returns per unit of risk. CNO Financial Group is currently generating about -0.16 per unit of risk. If you would invest 8,401 in Principal Financial Group on January 20, 2024 and sell it today you would lose (357.00) from holding Principal Financial Group or give up 4.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Principal Financial Group vs. CNO Financial Group
Performance |
| Timeline |
| Principal Financial |
| CNO Financial Group |
Principal Financial and CNO Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Principal Financial and CNO Financial
The main advantage of trading using opposite Principal Financial and CNO Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Financial position performs unexpectedly, CNO 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 CNO Financial will offset losses from the drop in CNO Financial'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 |
| CNO Financial vs. MetLife Preferred Stock | CNO Financial vs. FG Annuities Life | CNO Financial vs. American Equity Investment | CNO Financial vs. Prudential Public Limited |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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