Correlation Between Small Cap and Pimco High
Can any of the company-specific risk be diversified away by investing in both Small Cap and Pimco High 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 High 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 High Yield, you can compare the effects of market volatilities on Small Cap and Pimco High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Pimco High.
Diversification Opportunities for Small Cap and Pimco High
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Small and Pimco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Pimco High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco High Yield 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco High Yield has no effect on the direction of Small Cap i.e., Small Cap and Pimco High go up and down completely randomly.
Pair Corralation between Small Cap and Pimco High
Assuming the 90 days horizon Small Cap Equity is expected to generate 8.83 times more return on investment than Pimco High. However, Small Cap is 8.83 times more volatile than Pimco High Yield. It trades about 0.16 of its potential returns per unit of risk. Pimco High Yield is currently generating about 0.15 per unit of risk. If you would invest 1,803 in Small Cap Equity on September 2, 2024 and sell it today you would earn a total of 228.00 from holding Small Cap Equity or generate 12.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Equity vs. Pimco High Yield
Performance |
| Timeline |
| Small Cap Equity |
| Pimco High Yield |
Small Cap and Pimco High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Pimco High
The main advantage of trading using opposite Small Cap and Pimco High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Pimco High 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 High will offset losses from the drop in Pimco High's long position.| Small Cap vs. Growth Allocation Fund | Small Cap vs. Defensive Market Strategies | Small Cap vs. Defensive Market Strategies | Small Cap vs. Value Equity Institutional |
| Pimco High vs. Gamco Global Telecommunications | Pimco High vs. Old Westbury Municipal | Pimco High vs. California High Yield Municipal | Pimco High vs. Franklin High Yield |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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