Correlation Between Federated Institutional and Pimco Mortgage
Can any of the company-specific risk be diversified away by investing in both Federated Institutional and Pimco Mortgage 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 Federated Institutional and Pimco Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Institutional High and Pimco Mortgage Opportunities, you can compare the effects of market volatilities on Federated Institutional and Pimco Mortgage 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 Federated Institutional with a short position of Pimco Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Institutional and Pimco Mortgage.
Diversification Opportunities for Federated Institutional and Pimco Mortgage
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between FEDERATED and Pimco is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Federated Institutional High and Pimco Mortgage Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Mortgage Oppor and Federated Institutional 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 Federated Institutional High are associated (or correlated) with Pimco Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Mortgage Oppor has no effect on the direction of Federated Institutional i.e., Federated Institutional and Pimco Mortgage go up and down completely randomly.
Pair Corralation between Federated Institutional and Pimco Mortgage
Assuming the 90 days horizon Federated Institutional is expected to generate 1.13 times less return on investment than Pimco Mortgage. But when comparing it to its historical volatility, Federated Institutional High is 1.28 times less risky than Pimco Mortgage. It trades about 0.2 of its potential returns per unit of risk. Pimco Mortgage Opportunities is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 922.00 in Pimco Mortgage Opportunities on August 31, 2024 and sell it today you would earn a total of 7.00 from holding Pimco Mortgage Opportunities or generate 0.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Institutional High vs. Pimco Mortgage Opportunities
Performance |
| Timeline |
| Federated Institutional |
| Pimco Mortgage Oppor |
Federated Institutional and Pimco Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Institutional and Pimco Mortgage
The main advantage of trading using opposite Federated Institutional and Pimco Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Institutional position performs unexpectedly, Pimco Mortgage 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 Pimco Mortgage will offset losses from the drop in Pimco Mortgage's long position.The idea behind Federated Institutional High and Pimco Mortgage Opportunities 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 the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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