Correlation Between Pimco Rae and Short Duration
Can any of the company-specific risk be diversified away by investing in both Pimco Rae and Short Duration 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 Rae and Short Duration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pimco Rae Worldwide and Short Duration Municipal, you can compare the effects of market volatilities on Pimco Rae and Short Duration 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 Rae with a short position of Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Rae and Short Duration.
Diversification Opportunities for Pimco Rae and Short Duration
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pimco and Short is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Rae Worldwide and Short Duration Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Municipal and Pimco Rae 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 Rae Worldwide are associated (or correlated) with Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Municipal has no effect on the direction of Pimco Rae i.e., Pimco Rae and Short Duration go up and down completely randomly.
Pair Corralation between Pimco Rae and Short Duration
Assuming the 90 days horizon Pimco Rae Worldwide is expected to under-perform the Short Duration. In addition to that, Pimco Rae is 3.2 times more volatile than Short Duration Municipal. It trades about -0.15 of its total potential returns per unit of risk. Short Duration Municipal is currently generating about -0.13 per unit of volatility. If you would invest 831.00 in Short Duration Municipal on January 11, 2025 and sell it today you would lose (7.00) from holding Short Duration Municipal or give up 0.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Pimco Rae Worldwide vs. Short Duration Municipal
Performance |
| Timeline |
| Pimco Rae Worldwide |
| Short Duration Municipal |
Pimco Rae and Short Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pimco Rae and Short Duration
The main advantage of trading using opposite Pimco Rae and Short Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pimco Rae position performs unexpectedly, Short Duration 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 Short Duration will offset losses from the drop in Short Duration's long position.| Pimco Rae vs. Ab Global Real | Pimco Rae vs. Ab Global Bond | Pimco Rae vs. Franklin Mutual Global | Pimco Rae vs. Ab Global Bond |
| Short Duration vs. Blackrock Mid Cap Growth | Short Duration vs. T Rowe Price | Short Duration vs. Transamerica Financial Life | Short Duration vs. Virtus Kar Small Cap |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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