Correlation Between Investment Grade and Pimco Emerging
Can any of the company-specific risk be diversified away by investing in both Investment Grade 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 Investment Grade and Pimco Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investment Grade Porate and Pimco Emerging Markets, you can compare the effects of market volatilities on Investment Grade 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 Investment Grade with a short position of Pimco Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment Grade and Pimco Emerging.
Diversification Opportunities for Investment Grade and Pimco Emerging
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Investment and Pimco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Investment Grade Porate and Pimco Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Emerging Markets and Investment Grade 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 Investment Grade Porate 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 Markets has no effect on the direction of Investment Grade i.e., Investment Grade and Pimco Emerging go up and down completely randomly.
Pair Corralation between Investment Grade and Pimco Emerging
Assuming the 90 days horizon Investment Grade is expected to generate 1.18 times less return on investment than Pimco Emerging. In addition to that, Investment Grade is 1.23 times more volatile than Pimco Emerging Markets. It trades about 0.05 of its total potential returns per unit of risk. Pimco Emerging Markets is currently generating about 0.07 per unit of volatility. If you would invest 637.00 in Pimco Emerging Markets on August 25, 2024 and sell it today you would earn a total of 78.00 from holding Pimco Emerging Markets or generate 12.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investment Grade Porate vs. Pimco Emerging Markets
Performance |
| Timeline |
| Investment Grade Porate |
| Pimco Emerging Markets |
Investment Grade and Pimco Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investment Grade and Pimco Emerging
The main advantage of trading using opposite Investment Grade and Pimco Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment Grade 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.| Investment Grade vs. Vanguard Strategic Small Cap | Investment Grade vs. Eic Value Fund | Investment Grade vs. Qs Large Cap | Investment Grade vs. Archer Balanced Fund |
| Pimco Emerging vs. Pimco Rae Worldwide | Pimco Emerging vs. Pimco Rae Worldwide | Pimco Emerging vs. Pimco Rae Worldwide | Pimco Emerging vs. Pimco Rae Worldwide |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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