Correlation Between PRINCIPAL FINANCIAL and Otello ASA

Can any of the company-specific risk be diversified away by investing in both PRINCIPAL FINANCIAL and Otello ASA 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 Otello ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PRINCIPAL FINANCIAL and Otello ASA, you can compare the effects of market volatilities on PRINCIPAL FINANCIAL and Otello ASA 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 Otello ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRINCIPAL FINANCIAL and Otello ASA.

Diversification Opportunities for PRINCIPAL FINANCIAL and Otello ASA

0.44

Correlation Coefficient

PRINCIPAL FINANCIAL  Otello ASA

Very weak diversification

The 3 months correlation between PRINCIPAL and Otello is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding PRINCIPAL FINANCIAL and Otello ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otello ASA 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 are associated (or correlated) with Otello ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otello ASA has no effect on the direction of PRINCIPAL FINANCIAL i.e., PRINCIPAL FINANCIAL and Otello ASA go up and down completely randomly.

Pair Corralation between PRINCIPAL FINANCIAL and Otello ASA

Assuming the 90 days trading horizon PRINCIPAL FINANCIAL is expected to generate 2.66 times less return on investment than Otello ASA. But when comparing it to its historical volatility, PRINCIPAL FINANCIAL is 1.3 times less risky than Otello ASA. It trades about 0.16 of its potential returns per unit of risk. Otello ASA is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  75.00  in Otello ASA on April 22, 2025 and sell it today you would earn a total of  37.00  from holding Otello ASA or generate 49.33% return on investment over 90 days.

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

PRINCIPAL FINANCIAL  vs.  Otello ASA

PRINCIPAL FINANCIAL

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PRINCIPAL FINANCIAL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, PRINCIPAL FINANCIAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Otello ASA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Otello ASA are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Otello ASA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PRINCIPAL FINANCIAL and Otello ASA

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

The idea behind PRINCIPAL FINANCIAL and Otello ASA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.