Correlation Between Principal Lifetime and Zacks Small-cap

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

Diversification Opportunities for Principal Lifetime and Zacks Small-cap

0.97

Correlation Coefficient

Principal Lifetime  Zacks Small-cap

Almost no diversification

The 3 months correlation between Principal and Zacks is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Principal Lifetime Hybrid and Zacks Small Cap E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zacks Small Cap 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 Zacks Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zacks Small Cap has no effect on the direction of Principal Lifetime i.e., Principal Lifetime and Zacks Small-cap go up and down completely randomly.

Pair Corralation between Principal Lifetime and Zacks Small-cap

Assuming the 90 days horizon Principal Lifetime Hybrid is expected to generate 0.49 times more return on investment than Zacks Small-cap. However, Principal Lifetime Hybrid is 2.04 times less risky than Zacks Small-cap. It trades about 0.24 of its potential returns per unit of risk. Zacks Small Cap E is currently generating about 0.06 per unit of risk. If you would invest  1,715  in Principal Lifetime Hybrid on April 30, 2025 and sell it today you would earn a total of  37.00  from holding Principal Lifetime Hybrid or generate 2.16% 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.  Zacks Small Cap E

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 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Principal Lifetime may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Zacks Small Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zacks Small Cap E are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Zacks Small-cap may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Principal Lifetime and Zacks Small-cap

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

The idea behind Principal Lifetime Hybrid and Zacks Small Cap E 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.