Correlation Between Formidable Fortress and PIMCO Mortgage

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

By analyzing existing cross correlation between Formidable Fortress ETF and PIMCO Mortgage Backed Securities, you can compare the effects of market volatilities on Formidable Fortress and PIMCO Mortgage 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 Formidable Fortress with a short position of PIMCO Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formidable Fortress and PIMCO Mortgage.

Diversification Opportunities for Formidable Fortress and PIMCO Mortgage

-0.27

Correlation Coefficient

Formidable Fortress  PIMCO Mortgage

Very good diversification

The 3 months correlation between Formidable and PIMCO is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Formidable Fortress ETF and PIMCO Mortgage Backed Securiti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Mortgage Backed and Formidable Fortress 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 Formidable Fortress ETF are associated (or correlated) with PIMCO Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Mortgage Backed has no effect on the direction of Formidable Fortress i.e., Formidable Fortress and PIMCO Mortgage go up and down completely randomly.

Pair Corralation between Formidable Fortress and PIMCO Mortgage

Given the investment horizon of 90 days Formidable Fortress ETF is expected to generate 1.99 times more return on investment than PIMCO Mortgage. However, Formidable Fortress is 1.99 times more volatile than PIMCO Mortgage Backed Securities. It trades about 0.08 of its potential returns per unit of risk. PIMCO Mortgage Backed Securities is currently generating about -0.11 per unit of risk. If you would invest  2,874  in Formidable Fortress ETF on September 17, 2024 and sell it today you would earn a total of  100.67  from holding Formidable Fortress ETF or generate 3.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.85%
Values	Daily Returns

Formidable Fortress ETF  vs.  PIMCO Mortgage Backed Securiti

Formidable Fortress ETF

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Formidable Fortress ETF are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Formidable Fortress is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PIMCO Mortgage Backed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Mortgage Backed Securities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, PIMCO Mortgage is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Formidable Fortress and PIMCO Mortgage

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

The idea behind Formidable Fortress ETF and PIMCO Mortgage Backed Securities 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..