Correlation Between Dfa One and Pimco Short

Can any of the company-specific risk be diversified away by investing in both Dfa One and Pimco Short 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 Dfa One and Pimco Short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dfa One Year Fixed and Pimco Short Asset, you can compare the effects of market volatilities on Dfa One and Pimco Short 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 Dfa One with a short position of Pimco Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dfa One and Pimco Short.

Diversification Opportunities for Dfa One and Pimco Short

0.89

Correlation Coefficient

Dfa One  Pimco Short

Very poor diversification

The 3 months correlation between Dfa and Pimco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dfa One Year Fixed and Pimco Short Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Short Asset and Dfa One 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 Dfa One Year Fixed are associated (or correlated) with Pimco Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Short Asset has no effect on the direction of Dfa One i.e., Dfa One and Pimco Short go up and down completely randomly.

Pair Corralation between Dfa One and Pimco Short

Assuming the 90 days horizon Dfa One is expected to generate 1.18 times less return on investment than Pimco Short. But when comparing it to its historical volatility, Dfa One Year Fixed is 1.04 times less risky than Pimco Short. It trades about 0.14 of its potential returns per unit of risk. Pimco Short Asset is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  987.00  in Pimco Short Asset on September 23, 2024 and sell it today you would earn a total of  8.00  from holding Pimco Short Asset or generate 0.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Dfa One Year Fixed  vs.  Pimco Short Asset

Dfa One Year

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dfa One Year Fixed are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Dfa One is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Short Asset

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Short Asset are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Pimco Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dfa One and Pimco Short

The main advantage of trading using opposite Dfa One and Pimco Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dfa One position performs unexpectedly, Pimco Short 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 Short will offset losses from the drop in Pimco Short's long position.

The idea behind Dfa One Year Fixed and Pimco Short Asset 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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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.