Correlation Between Principal Financial and Sampo Oyj

Can any of the company-specific risk be diversified away by investing in both Principal Financial and Sampo Oyj 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 Sampo Oyj 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 Sampo Oyj, you can compare the effects of market volatilities on Principal Financial and Sampo Oyj 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 Sampo Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Financial and Sampo Oyj.

Diversification Opportunities for Principal Financial and Sampo Oyj

0.08

Correlation Coefficient

Principal Financial  Sampo Oyj

Significant diversification

The 3 months correlation between Principal and Sampo is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Principal Financial Group and Sampo Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sampo Oyj 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 Sampo Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sampo Oyj has no effect on the direction of Principal Financial i.e., Principal Financial and Sampo Oyj go up and down completely randomly.

Pair Corralation between Principal Financial and Sampo Oyj

Considering the 90-day investment horizon Principal Financial Group is expected to under-perform the Sampo Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Principal Financial Group is 1.8 times less risky than Sampo Oyj. The stock trades about -0.15 of its potential returns per unit of risk. The Sampo Oyj is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,247  in Sampo Oyj on February 7, 2024 and sell it today you would lose (172.00) from holding Sampo Oyj or give up 4.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Principal Financial Group  vs.  Sampo Oyj

Principal Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Financial Group are ranked lower than 5 (%) 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.

Sampo Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sampo Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sampo Oyj is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Principal Financial and Sampo Oyj

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

The idea behind Principal Financial Group and Sampo Oyj 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.