Correlation Between Principal Financial and Jefferies Financial

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

Diversification Opportunities for Principal Financial and Jefferies Financial

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Principal and Jefferies is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Principal Financial Group, and Jefferies Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jefferies Financial and Principal Financial 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 Financial Group, are associated (or correlated) with Jefferies Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jefferies Financial has no effect on the direction of Principal Financial i.e., Principal Financial and Jefferies Financial go up and down completely randomly.

Pair Corralation between Principal Financial and Jefferies Financial

Assuming the 90 days trading horizon Principal Financial is expected to generate 19.76 times less return on investment than Jefferies Financial. But when comparing it to its historical volatility, Principal Financial Group, is 19.53 times less risky than Jefferies Financial. It trades about 0.13 of its potential returns per unit of risk. Jefferies Financial Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  26,187  in Jefferies Financial Group on April 23, 2025 and sell it today you would earn a total of  4,653  from holding Jefferies Financial Group or generate 17.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Principal Financial Group,  vs.  Jefferies Financial Group

 Performance 
       Timeline  
Principal Financial 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Principal Financial Group, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Principal Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Jefferies Financial 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Jefferies Financial Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Jefferies Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Principal Financial and Jefferies Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Principal Financial and Jefferies Financial

The main advantage of trading using opposite Principal Financial and Jefferies Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Financial position performs unexpectedly, Jefferies 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 Jefferies Financial will offset losses from the drop in Jefferies Financial's long position.
The idea behind Principal Financial Group, and Jefferies 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.
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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