Correlation Between Principal Exchange and Exchange Traded

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

By analyzing existing cross correlation between Principal Exchange Traded Funds and Exchange Traded Concepts, you can compare the effects of market volatilities on Principal Exchange and Exchange Traded 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 Exchange with a short position of Exchange Traded. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Exchange and Exchange Traded.

Diversification Opportunities for Principal Exchange and Exchange Traded

0.53

Correlation Coefficient

Principal Exchange  Exchange Traded

Very weak diversification

The 3 months correlation between Principal and Exchange is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Principal Exchange Traded Fund and Exchange Traded Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Traded Concepts and Principal Exchange 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 Exchange Traded Funds are associated (or correlated) with Exchange Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Traded Concepts has no effect on the direction of Principal Exchange i.e., Principal Exchange and Exchange Traded go up and down completely randomly.

Pair Corralation between Principal Exchange and Exchange Traded

Allowing for the 90-day total investment horizon Principal Exchange Traded Funds is expected to generate 2.14 times more return on investment than Exchange Traded. However, Principal Exchange is 2.14 times more volatile than Exchange Traded Concepts. It trades about 0.13 of its potential returns per unit of risk. Exchange Traded Concepts is currently generating about -0.01 per unit of risk. If you would invest  2,015  in Principal Exchange Traded Funds on May 2, 2025 and sell it today you would earn a total of  58.00  from holding Principal Exchange Traded Funds or generate 2.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	43.55%
Values	Daily Returns

Principal Exchange Traded Fund  vs.  Exchange Traded Concepts

Principal Exchange

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Exchange Traded Funds are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Principal Exchange is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Exchange Traded Concepts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exchange Traded Concepts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Exchange Traded is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Principal Exchange and Exchange Traded

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

The idea behind Principal Exchange Traded Funds and Exchange Traded Concepts 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.