Correlation Between PIMCO Enhanced and Virtus Newfleet

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

By analyzing existing cross correlation between PIMCO Enhanced Short and Virtus Newfleet ABSMBS, you can compare the effects of market volatilities on PIMCO Enhanced and Virtus Newfleet 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 PIMCO Enhanced with a short position of Virtus Newfleet. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Enhanced and Virtus Newfleet.

Diversification Opportunities for PIMCO Enhanced and Virtus Newfleet

0.39

Correlation Coefficient

PIMCO Enhanced  Virtus Newfleet

Weak diversification

The 3 months correlation between PIMCO and Virtus is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Enhanced Short and Virtus Newfleet ABSMBS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Newfleet ABSMBS and PIMCO Enhanced 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 PIMCO Enhanced Short are associated (or correlated) with Virtus Newfleet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Newfleet ABSMBS has no effect on the direction of PIMCO Enhanced i.e., PIMCO Enhanced and Virtus Newfleet go up and down completely randomly.

Pair Corralation between PIMCO Enhanced and Virtus Newfleet

Given the investment horizon of 90 days PIMCO Enhanced Short is expected to generate 0.35 times more return on investment than Virtus Newfleet. However, PIMCO Enhanced Short is 2.84 times less risky than Virtus Newfleet. It trades about 0.57 of its potential returns per unit of risk. Virtus Newfleet ABSMBS is currently generating about 0.2 per unit of risk. If you would invest  9,934  in PIMCO Enhanced Short on August 30, 2024 and sell it today you would earn a total of  134.00  from holding PIMCO Enhanced Short or generate 1.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

PIMCO Enhanced Short  vs.  Virtus Newfleet ABSMBS

PIMCO Enhanced Short

Risk-Adjusted Performance

45 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Enhanced Short are ranked lower than 45 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PIMCO Enhanced is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Virtus Newfleet ABSMBS

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Newfleet ABSMBS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Virtus Newfleet is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PIMCO Enhanced and Virtus Newfleet

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

The idea behind PIMCO Enhanced Short and Virtus Newfleet ABSMBS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.