Correlation Between Us Small and Pimco Global

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

By analyzing existing cross correlation between Us Small Cap and Pimco Global Multi Asset, you can compare the effects of market volatilities on Us Small and Pimco Global 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 Us Small with a short position of Pimco Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Small and Pimco Global.

Diversification Opportunities for Us Small and Pimco Global

0.61

Correlation Coefficient

Us Small  Pimco Global

Poor diversification

The 3 months correlation between DFSVX and Pimco is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Us Small Cap and Pimco Global Multi Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Global Multi and Us Small 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 Us Small Cap are associated (or correlated) with Pimco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Global Multi has no effect on the direction of Us Small i.e., Us Small and Pimco Global go up and down completely randomly.

Pair Corralation between Us Small and Pimco Global

Assuming the 90 days horizon Us Small Cap is expected to generate 3.34 times more return on investment than Pimco Global. However, Us Small is 3.34 times more volatile than Pimco Global Multi Asset. It trades about 0.09 of its potential returns per unit of risk. Pimco Global Multi Asset is currently generating about 0.1 per unit of risk. If you would invest  4,764  in Us Small Cap on September 15, 2024 and sell it today you would earn a total of  330.00  from holding Us Small Cap or generate 6.93% return on investment over 90 days.

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

Us Small Cap  vs.  Pimco Global Multi Asset

Us Small Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Us Small Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pimco Global Multi

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Global Multi Asset are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pimco Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Us Small and Pimco Global

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

The idea behind Us Small Cap and Pimco Global Multi 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.