Correlation Between Investment Grade and Pimco International

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

By analyzing existing cross correlation between Investment Grade Porate and Pimco International Stocksplus, you can compare the effects of market volatilities on Investment Grade and Pimco International 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 Investment Grade with a short position of Pimco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment Grade and Pimco International.

Diversification Opportunities for Investment Grade and Pimco International

0.47

Correlation Coefficient

Investment Grade  Pimco International

Very weak diversification

The 3 months correlation between Investment and Pimco is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Investment Grade Porate and Pimco International Stocksplus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco International and Investment Grade 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 Investment Grade Porate are associated (or correlated) with Pimco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco International has no effect on the direction of Investment Grade i.e., Investment Grade and Pimco International go up and down completely randomly.

Pair Corralation between Investment Grade and Pimco International

Assuming the 90 days horizon Investment Grade Porate is expected to under-perform the Pimco International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Investment Grade Porate is 2.27 times less risky than Pimco International. The mutual fund trades about -0.3 of its potential returns per unit of risk. The Pimco International Stocksplus is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  774.00  in Pimco International Stocksplus on September 26, 2024 and sell it today you would lose (4.00) from holding Pimco International Stocksplus or give up 0.52% of portfolio value over 90 days.

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

Investment Grade Porate  vs.  Pimco International Stocksplus

Investment Grade Porate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investment Grade Porate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Investment Grade is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco International Stocksplus has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pimco International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Investment Grade and Pimco International

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

The idea behind Investment Grade Porate and Pimco International Stocksplus 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.

Check out your portfolio center.

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.