Correlation Between Federal Life and Primerica

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

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

Diversification Opportunities for Federal Life and Primerica

-0.79

Correlation Coefficient

Federal Life  Primerica

Pay attention - limited upside

The 3 months correlation between Federal and Primerica is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Federal Life Group and Primerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primerica and Federal Life 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 Federal Life Group 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 Federal Life i.e., Federal Life and Primerica go up and down completely randomly.

Pair Corralation between Federal Life and Primerica

If you would invest  25,735  in Primerica on August 15, 2024 and sell it today you would earn a total of  4,529  from holding Primerica or generate 17.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Federal Life Group  vs.  Primerica

Federal Life Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Primerica

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Primerica are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, Primerica demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal Life and Primerica

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

The idea behind Federal Life Group and Primerica 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.