Correlation Between Pimco Fundamental and Investment Grade

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

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

Diversification Opportunities for Pimco Fundamental and Investment Grade

0.7

Correlation Coefficient

Pimco Fundamental  Investment Grade

Poor diversification

The 3 months correlation between Pimco and Investment is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Fundamental Advantage and Investment Grade Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Grade Porate and Pimco Fundamental 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 Fundamental Advantage are associated (or correlated) with Investment Grade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Grade Porate has no effect on the direction of Pimco Fundamental i.e., Pimco Fundamental and Investment Grade go up and down completely randomly.

Pair Corralation between Pimco Fundamental and Investment Grade

Assuming the 90 days horizon Pimco Fundamental Advantage is expected to under-perform the Investment Grade. In addition to that, Pimco Fundamental is 1.57 times more volatile than Investment Grade Porate. It trades about -0.04 of its total potential returns per unit of risk. Investment Grade Porate is currently generating about -0.03 per unit of volatility. If you would invest  914.00  in Investment Grade Porate on September 4, 2024 and sell it today you would lose (6.00) from holding Investment Grade Porate or give up 0.66% of portfolio value over 90 days.

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

Pimco Fundamental Advantage  vs.  Investment Grade Porate

Pimco Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Pimco Fundamental and Investment Grade

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

The idea behind Pimco Fundamental Advantage and Investment Grade Porate 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.