Correlation Between Pimco Mortgage and Arbitrage Credit

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

By analyzing existing cross correlation between Pimco Mortgage Opportunities and The Arbitrage Credit, you can compare the effects of market volatilities on Pimco Mortgage and Arbitrage Credit 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 Mortgage with a short position of Arbitrage Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Mortgage and Arbitrage Credit.

Diversification Opportunities for Pimco Mortgage and Arbitrage Credit

-0.66

Correlation Coefficient

Pimco Mortgage  Arbitrage Credit

Excellent diversification

The 3 months correlation between Pimco and Arbitrage is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Mortgage Opportunities and The Arbitrage Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Credit and Pimco Mortgage 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 Mortgage Opportunities are associated (or correlated) with Arbitrage Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Credit has no effect on the direction of Pimco Mortgage i.e., Pimco Mortgage and Arbitrage Credit go up and down completely randomly.

Pair Corralation between Pimco Mortgage and Arbitrage Credit

Assuming the 90 days horizon Pimco Mortgage is expected to generate 1.06 times less return on investment than Arbitrage Credit. In addition to that, Pimco Mortgage is 2.2 times more volatile than The Arbitrage Credit. It trades about 0.08 of its total potential returns per unit of risk. The Arbitrage Credit is currently generating about 0.2 per unit of volatility. If you would invest  906.00  in The Arbitrage Credit on September 12, 2024 and sell it today you would earn a total of  75.00  from holding The Arbitrage Credit or generate 8.28% return on investment over 90 days.

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

Pimco Mortgage Opportunities  vs.  The Arbitrage Credit

Pimco Mortgage Oppor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Arbitrage Credit

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Credit are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Arbitrage Credit 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 Mortgage and Arbitrage Credit

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

The idea behind Pimco Mortgage Opportunities and The Arbitrage Credit 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.