Correlation Between Total Return and Core Plus
Can any of the company-specific risk be diversified away by investing in both Total Return and Core Plus 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 Total Return and Core Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Return Fund and Core Plus Fund, you can compare the effects of market volatilities on Total Return and Core Plus 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 Total Return with a short position of Core Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Core Plus.
Diversification Opportunities for Total Return and Core Plus
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Total and Core is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Fund and Core Plus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Plus Fund and Total Return 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 Total Return Fund are associated (or correlated) with Core Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Plus Fund has no effect on the direction of Total Return i.e., Total Return and Core Plus go up and down completely randomly.
Pair Corralation between Total Return and Core Plus
Assuming the 90 days horizon Total Return Fund is expected to generate 1.14 times more return on investment than Core Plus. However, Total Return is 1.14 times more volatile than Core Plus Fund. It trades about 0.09 of its potential returns per unit of risk. Core Plus Fund is currently generating about -0.03 per unit of risk. If you would invest 856.00 in Total Return Fund on August 28, 2024 and sell it today you would earn a total of 6.00 from holding Total Return Fund or generate 0.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Total Return Fund vs. Core Plus Fund
Performance |
| Timeline |
| Total Return |
| Core Plus Fund |
Total Return and Core Plus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Return and Core Plus
The main advantage of trading using opposite Total Return and Core Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Return position performs unexpectedly, Core Plus 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 Core Plus will offset losses from the drop in Core Plus' long position.| Total Return vs. Pimco Rae Worldwide | Total Return vs. Pimco Rae Worldwide | Total Return vs. Pimco Rae Worldwide | Total Return vs. Pimco Rae Worldwide |
| Core Plus vs. Mid Cap Value | Core Plus vs. Equity Growth Fund | Core Plus vs. Income Growth Fund | Core Plus vs. Diversified Bond Fund |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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