Correlation Between Small Cap and Pimco Real
Can any of the company-specific risk be diversified away by investing in both Small Cap and Pimco Real 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 Real 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 Real Return, you can compare the effects of market volatilities on Small Cap and Pimco Real 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 Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Pimco Real.
Diversification Opportunities for Small Cap and Pimco Real
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Small and Pimco is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Pimco Real Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Real Return 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 Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Real Return has no effect on the direction of Small Cap i.e., Small Cap and Pimco Real go up and down completely randomly.
Pair Corralation between Small Cap and Pimco Real
Assuming the 90 days horizon Small Cap Equity is expected to generate 1.8 times more return on investment than Pimco Real. However, Small Cap is 1.8 times more volatile than Pimco Real Return. It trades about 0.22 of its potential returns per unit of risk. Pimco Real Return is currently generating about -0.07 per unit of risk. If you would invest 1,872 in Small Cap Equity on August 28, 2024 and sell it today you would earn a total of 141.00 from holding Small Cap Equity or generate 7.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Small Cap Equity vs. Pimco Real Return
Performance |
| Timeline |
| Small Cap Equity |
| Pimco Real Return |
Small Cap and Pimco Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Pimco Real
The main advantage of trading using opposite Small Cap and Pimco Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Pimco Real 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 Real will offset losses from the drop in Pimco Real's long position.| Small Cap vs. Franklin Government Money | Small Cap vs. Blackrock Funds Iii | Small Cap vs. Transamerica Funds | Small Cap vs. Massmutual Premier Funds |
| Pimco Real vs. Legg Mason Partners | Pimco Real vs. Blackrock Funds Iii | Pimco Real vs. Franklin Government Money | Pimco Real vs. Institutional Fiduciary Trust |
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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