Correlation Between Principal Lifetime and Retirement Living

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

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

Diversification Opportunities for Principal Lifetime and Retirement Living

0.99

Correlation Coefficient

Principal Lifetime  Retirement Living

No risk reduction

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

Pair Corralation between Principal Lifetime and Retirement Living

Assuming the 90 days horizon Principal Lifetime is expected to generate 1.33 times less return on investment than Retirement Living. But when comparing it to its historical volatility, Principal Lifetime Hybrid is 1.67 times less risky than Retirement Living. It trades about 0.2 of its potential returns per unit of risk. Retirement Living Through is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,574  in Retirement Living Through on July 26, 2025 and sell it today you would earn a total of  94.00  from holding Retirement Living Through or generate 5.97% return on investment over 90 days.

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

Principal Lifetime Hybrid  vs.  Retirement Living Through

Principal Lifetime Hybrid

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Lifetime Hybrid are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Principal Lifetime is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Retirement Living Through

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Retirement Living Through are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Retirement Living is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Principal Lifetime and Retirement Living

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

The idea behind Principal Lifetime Hybrid and Retirement Living Through 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.