Correlation Between Small Cap and Pimco Emerging
Can any of the company-specific risk be diversified away by investing in both Small Cap and Pimco Emerging 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 Small Cap and Pimco Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Equity and Pimco Emerging Local, you can compare the effects of market volatilities on Small Cap and Pimco Emerging 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 Small Cap with a short position of Pimco Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Pimco Emerging.
Diversification Opportunities for Small Cap and Pimco Emerging
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Small and Pimco is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Pimco Emerging Local in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Emerging Local and Small Cap 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 Small Cap Equity are associated (or correlated) with Pimco Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Emerging Local has no effect on the direction of Small Cap i.e., Small Cap and Pimco Emerging go up and down completely randomly.
Pair Corralation between Small Cap and Pimco Emerging
Assuming the 90 days horizon Small Cap Equity is expected to generate 2.5 times more return on investment than Pimco Emerging. However, Small Cap is 2.5 times more volatile than Pimco Emerging Local. It trades about 0.05 of its potential returns per unit of risk. Pimco Emerging Local is currently generating about 0.07 per unit of risk. If you would invest 1,577 in Small Cap Equity on September 3, 2024 and sell it today you would earn a total of 454.00 from holding Small Cap Equity or generate 28.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Equity vs. Pimco Emerging Local
Performance |
| Timeline |
| Small Cap Equity |
| Pimco Emerging Local |
Small Cap and Pimco Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Pimco Emerging
The main advantage of trading using opposite Small Cap and Pimco Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Pimco Emerging 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 Emerging will offset losses from the drop in Pimco Emerging's long position.| Small Cap vs. Semiconductor Ultrasector Profund | Small Cap vs. Qs Large Cap | Small Cap vs. Fm Investments Large | Small Cap vs. T Rowe Price |
| Pimco Emerging vs. Sprott Gold Equity | Pimco Emerging vs. Fidelity Advisor Gold | Pimco Emerging vs. Gabelli Gold Fund | Pimco Emerging vs. Global Gold Fund |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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