Correlation Between Balanced Fund and Principal Lifetime

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

By analyzing existing cross correlation between Balanced Fund Institutional and Principal Lifetime Hybrid, you can compare the effects of market volatilities on Balanced Fund and Principal Lifetime 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 Balanced Fund with a short position of Principal Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Principal Lifetime.

Diversification Opportunities for Balanced Fund and Principal Lifetime

0.99

Correlation Coefficient

Balanced Fund  Principal Lifetime

No risk reduction

The 3 months correlation between Balanced and PRINCIPAL is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Institutional and Principal Lifetime Hybrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Lifetime Hybrid and Balanced Fund 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 Balanced Fund Institutional are associated (or correlated) with Principal Lifetime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Lifetime Hybrid has no effect on the direction of Balanced Fund i.e., Balanced Fund and Principal Lifetime go up and down completely randomly.

Pair Corralation between Balanced Fund and Principal Lifetime

Assuming the 90 days horizon Balanced Fund is expected to generate 1.28 times less return on investment than Principal Lifetime. But when comparing it to its historical volatility, Balanced Fund Institutional is 1.45 times less risky than Principal Lifetime. It trades about 0.26 of its potential returns per unit of risk. Principal Lifetime Hybrid is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,741  in Principal Lifetime Hybrid on May 25, 2025 and sell it today you would earn a total of  150.00  from holding Principal Lifetime Hybrid or generate 8.62% return on investment over 90 days.

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

Balanced Fund Institutional  vs.  Principal Lifetime Hybrid

Balanced Fund Instit

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Institutional are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Balanced Fund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Principal Lifetime Hybrid

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Lifetime Hybrid are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Principal Lifetime may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Balanced Fund and Principal Lifetime

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

The idea behind Balanced Fund Institutional and Principal Lifetime Hybrid 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.