Correlation Between Small Cap and Pimco International
Can any of the company-specific risk be diversified away by investing in both Small Cap and Pimco International 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 International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Series and Pimco International Bond, you can compare the effects of market volatilities on Small Cap and Pimco International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Pimco International.
Diversification Opportunities for Small Cap and Pimco International
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Small and Pimco is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Series and Pimco International Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco International Bond 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 Value Series are associated (or correlated) with Pimco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco International Bond has no effect on the direction of Small Cap i.e., Small Cap and Pimco International go up and down completely randomly.
Pair Corralation between Small Cap and Pimco International
Assuming the 90 days horizon Small Cap Value Series is expected to generate 9.33 times more return on investment than Pimco International. However, Small Cap is 9.33 times more volatile than Pimco International Bond. It trades about 0.29 of its potential returns per unit of risk. Pimco International Bond is currently generating about 0.21 per unit of risk. If you would invest 1,687 in Small Cap Value Series on August 29, 2024 and sell it today you would earn a total of 178.00 from holding Small Cap Value Series or generate 10.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Series vs. Pimco International Bond
Performance |
| Timeline |
| Small Cap Value |
| Pimco International Bond |
Small Cap and Pimco International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Pimco International
The main advantage of trading using opposite Small Cap and Pimco International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Pimco International 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 International will offset losses from the drop in Pimco International's long position.| Small Cap vs. Lord Abbett Trust | Small Cap vs. Lord Abbett Trust | Small Cap vs. Floating Rate Fund | Small Cap vs. Lord Abbett Inv |
| Pimco International vs. Small Cap Value Series | Pimco International vs. Pace Smallmedium Value | Pimco International vs. Ultramid Cap Profund Ultramid Cap | Pimco International vs. Amg River Road |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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