Correlation Between Pace International and Pimco Fundamental
Can any of the company-specific risk be diversified away by investing in both Pace International and Pimco Fundamental 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 Pace International and Pimco Fundamental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace International Emerging and Pimco Fundamental Advantage, you can compare the effects of market volatilities on Pace International and Pimco Fundamental 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 Pace International with a short position of Pimco Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace International and Pimco Fundamental.
Diversification Opportunities for Pace International and Pimco Fundamental
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pace and Pimco is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pace International Emerging and Pimco Fundamental Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Fundamental and Pace International 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 Pace International Emerging are associated (or correlated) with Pimco Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Fundamental has no effect on the direction of Pace International i.e., Pace International and Pimco Fundamental go up and down completely randomly.
Pair Corralation between Pace International and Pimco Fundamental
Assuming the 90 days horizon Pace International Emerging is expected to generate 2.05 times more return on investment than Pimco Fundamental. However, Pace International is 2.05 times more volatile than Pimco Fundamental Advantage. It trades about 0.05 of its potential returns per unit of risk. Pimco Fundamental Advantage is currently generating about -0.11 per unit of risk. If you would invest 1,314 in Pace International Emerging on September 17, 2024 and sell it today you would earn a total of 42.00 from holding Pace International Emerging or generate 3.2% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Pace International Emerging vs. Pimco Fundamental Advantage
Performance |
Timeline |
Pace International |
Pimco Fundamental |
Pace International and Pimco Fundamental Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Pace International and Pimco Fundamental
The main advantage of trading using opposite Pace International and Pimco Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace International position performs unexpectedly, Pimco Fundamental 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 Fundamental will offset losses from the drop in Pimco Fundamental's long position.The idea behind Pace International Emerging and Pimco Fundamental Advantage 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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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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