Correlation Between Energy Basic and Pimco Energy
Can any of the company-specific risk be diversified away by investing in both Energy Basic and Pimco Energy 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 Energy Basic and Pimco Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Basic Materials and Pimco Energy Tactical, you can compare the effects of market volatilities on Energy Basic and Pimco Energy 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 Energy Basic with a short position of Pimco Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and Pimco Energy.
Diversification Opportunities for Energy Basic and Pimco Energy
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Energy and Pimco is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and Pimco Energy Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Energy Tactical and Energy Basic 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 Energy Basic Materials are associated (or correlated) with Pimco Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Energy Tactical has no effect on the direction of Energy Basic i.e., Energy Basic and Pimco Energy go up and down completely randomly.
Pair Corralation between Energy Basic and Pimco Energy
Assuming the 90 days horizon Energy Basic Materials is expected to generate 0.59 times more return on investment than Pimco Energy. However, Energy Basic Materials is 1.71 times less risky than Pimco Energy. It trades about -0.22 of its potential returns per unit of risk. Pimco Energy Tactical is currently generating about -0.18 per unit of risk. If you would invest 1,347 in Energy Basic Materials on December 13, 2024 and sell it today you would lose (61.00) from holding Energy Basic Materials or give up 4.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Basic Materials vs. Pimco Energy Tactical
Performance |
| Timeline |
| Energy Basic Materials |
| Pimco Energy Tactical |
Energy Basic and Pimco Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Basic and Pimco Energy
The main advantage of trading using opposite Energy Basic and Pimco Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Basic position performs unexpectedly, Pimco Energy 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 Energy will offset losses from the drop in Pimco Energy's long position.| Energy Basic vs. Guidemark Large Cap | ||
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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