Correlation Between Pimco Fundamental and Pimco Long-term
Can any of the company-specific risk be diversified away by investing in both Pimco Fundamental and Pimco Long-term 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 Pimco Fundamental and Pimco Long-term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pimco Fundamental Advantage and Pimco Long Term Credit, you can compare the effects of market volatilities on Pimco Fundamental and Pimco Long-term 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 Pimco Fundamental with a short position of Pimco Long-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Fundamental and Pimco Long-term.
Diversification Opportunities for Pimco Fundamental and Pimco Long-term
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Pimco and Pimco is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Fundamental Advantage and Pimco Long Term Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Long Term and Pimco Fundamental 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 Pimco Fundamental Advantage are associated (or correlated) with Pimco Long-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Long Term has no effect on the direction of Pimco Fundamental i.e., Pimco Fundamental and Pimco Long-term go up and down completely randomly.
Pair Corralation between Pimco Fundamental and Pimco Long-term
Assuming the 90 days horizon Pimco Fundamental is expected to generate 1.92 times less return on investment than Pimco Long-term. But when comparing it to its historical volatility, Pimco Fundamental Advantage is 1.07 times less risky than Pimco Long-term. It trades about 0.13 of its potential returns per unit of risk. Pimco Long Term Credit is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 869.00 in Pimco Long Term Credit on November 28, 2024 and sell it today you would earn a total of 27.00 from holding Pimco Long Term Credit or generate 3.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Pimco Fundamental Advantage vs. Pimco Long Term Credit
Performance |
| Timeline |
| Pimco Fundamental |
| Pimco Long Term |
Pimco Fundamental and Pimco Long-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pimco Fundamental and Pimco Long-term
The main advantage of trading using opposite Pimco Fundamental and Pimco Long-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pimco Fundamental position performs unexpectedly, Pimco Long-term 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 Long-term will offset losses from the drop in Pimco Long-term's long position.The idea behind Pimco Fundamental Advantage and Pimco Long Term Credit 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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