Correlation Between Stone Ridge and Principal Lifetime
Can any of the company-specific risk be diversified away by investing in both Stone Ridge and Principal Lifetime 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 Stone Ridge and Principal Lifetime into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stone Ridge Diversified and Principal Lifetime Hybrid, you can compare the effects of market volatilities on Stone Ridge and Principal Lifetime 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 Stone Ridge with a short position of Principal Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Principal Lifetime.
Diversification Opportunities for Stone Ridge and Principal Lifetime
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Stone and Principal is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified and Principal Lifetime Hybrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Lifetime Hybrid and Stone Ridge 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 Stone Ridge Diversified are associated (or correlated) with Principal Lifetime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Lifetime Hybrid has no effect on the direction of Stone Ridge i.e., Stone Ridge and Principal Lifetime go up and down completely randomly.
Pair Corralation between Stone Ridge and Principal Lifetime
Assuming the 90 days horizon Stone Ridge is expected to generate 1.59 times less return on investment than Principal Lifetime. But when comparing it to its historical volatility, Stone Ridge Diversified is 1.83 times less risky than Principal Lifetime. It trades about 0.26 of its potential returns per unit of risk. Principal Lifetime Hybrid is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,319 in Principal Lifetime Hybrid on June 12, 2025 and sell it today you would earn a total of 64.00 from holding Principal Lifetime Hybrid or generate 4.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stone Ridge Diversified vs. Principal Lifetime Hybrid
Performance |
| Timeline |
| Stone Ridge Diversified |
| Principal Lifetime Hybrid |
Stone Ridge and Principal Lifetime Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stone Ridge and Principal Lifetime
The main advantage of trading using opposite Stone Ridge and Principal Lifetime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge position performs unexpectedly, Principal Lifetime 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 Lifetime will offset losses from the drop in Principal Lifetime's long position.| Stone Ridge vs. Artisan High Income | Stone Ridge vs. Praxis Impact Bond | Stone Ridge vs. Calvert Bond Portfolio | Stone Ridge vs. Jhvit Core Bond |
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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 the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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