Correlation Between SPTSX Dividend and PIMCO Monthly

Can any of the company-specific risk be diversified away by investing in both SPTSX Dividend and PIMCO Monthly 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 SPTSX Dividend and PIMCO Monthly into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPTSX Dividend Aristocrats and PIMCO Monthly Income, you can compare the effects of market volatilities on SPTSX Dividend and PIMCO Monthly 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 SPTSX Dividend with a short position of PIMCO Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPTSX Dividend and PIMCO Monthly.

Diversification Opportunities for SPTSX Dividend and PIMCO Monthly

-0.49

Correlation Coefficient

SPTSX Dividend  PIMCO Monthly

Very good diversification

The 3 months correlation between SPTSX and PIMCO is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Dividend Aristocrats and PIMCO Monthly Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Monthly Income and SPTSX Dividend 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 SPTSX Dividend Aristocrats are associated (or correlated) with PIMCO Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Monthly Income has no effect on the direction of SPTSX Dividend i.e., SPTSX Dividend and PIMCO Monthly go up and down completely randomly.

Pair Corralation between SPTSX Dividend and PIMCO Monthly

Assuming the 90 days trading horizon SPTSX Dividend Aristocrats is expected to under-perform the PIMCO Monthly. In addition to that, SPTSX Dividend is 2.27 times more volatile than PIMCO Monthly Income. It trades about -0.35 of its total potential returns per unit of risk. PIMCO Monthly Income is currently generating about -0.12 per unit of volatility. If you would invest  1,257  in PIMCO Monthly Income on September 23, 2024 and sell it today you would lose (7.00) from holding PIMCO Monthly Income or give up 0.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

SPTSX Dividend Aristocrats  vs.  PIMCO Monthly Income

Pair Trading with SPTSX Dividend and PIMCO Monthly

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

The idea behind SPTSX Dividend Aristocrats and PIMCO Monthly Income 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.