Correlation Between Omega Therapeutics and Principal Financial

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Can any of the company-specific risk be diversified away by investing in both Omega Therapeutics and Principal Financial 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 Omega Therapeutics and Principal Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Omega Therapeutics and Principal Financial Group, you can compare the effects of market volatilities on Omega Therapeutics and Principal Financial 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 Omega Therapeutics with a short position of Principal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Omega Therapeutics and Principal Financial.

Diversification Opportunities for Omega Therapeutics and Principal Financial

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Omega and Principal is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Omega Therapeutics and Principal Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Financial and Omega Therapeutics 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 Omega Therapeutics are associated (or correlated) with Principal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Financial has no effect on the direction of Omega Therapeutics i.e., Omega Therapeutics and Principal Financial go up and down completely randomly.

Pair Corralation between Omega Therapeutics and Principal Financial

If you would invest  6,809  in Principal Financial Group on August 31, 2022 and sell it today you would earn a total of  2,175  from holding Principal Financial Group or generate 31.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy0.4%
ValuesDaily Returns

Omega Therapeutics  vs.  Principal Financial Group

 Performance (%) 
       Timeline  
Omega Therapeutics 
Omega Performance
0 of 100
Over the last 90 days Omega Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak technical and fundamental indicators, Omega Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.
Principal Financial 
Principal Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Principal Financial Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Principal Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Principal Price Channel

Omega Therapeutics and Principal Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Omega Therapeutics and Principal Financial

The main advantage of trading using opposite Omega Therapeutics and Principal Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Omega Therapeutics position performs unexpectedly, Principal Financial 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 Financial will offset losses from the drop in Principal Financial's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Omega Therapeutics as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Omega Therapeutics' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Omega Therapeutics' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Omega Therapeutics.
The idea behind Omega Therapeutics and Principal Financial Group 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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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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