Correlation Between Pimco Small and Pimco Short

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

By analyzing existing cross correlation between Pimco Small Cap and Pimco Short Asset, you can compare the effects of market volatilities on Pimco Small and Pimco Short 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 Small with a short position of Pimco Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Small and Pimco Short.

Diversification Opportunities for Pimco Small and Pimco Short

0.71

Correlation Coefficient

Pimco Small  Pimco Short

Poor diversification

The 3 months correlation between Pimco and Pimco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Small Cap and Pimco Short Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Short Asset and Pimco Small 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 Small Cap are associated (or correlated) with Pimco Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Short Asset has no effect on the direction of Pimco Small i.e., Pimco Small and Pimco Short go up and down completely randomly.

Pair Corralation between Pimco Small and Pimco Short

Assuming the 90 days horizon Pimco Small Cap is expected to generate 15.73 times more return on investment than Pimco Short. However, Pimco Small is 15.73 times more volatile than Pimco Short Asset. It trades about 0.1 of its potential returns per unit of risk. Pimco Short Asset is currently generating about 0.18 per unit of risk. If you would invest  780.00  in Pimco Small Cap on September 15, 2024 and sell it today you would earn a total of  59.00  from holding Pimco Small Cap or generate 7.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Pimco Small Cap  vs.  Pimco Short Asset

Pimco Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pimco Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pimco Short Asset

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Short Asset are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Pimco Short 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 Small and Pimco Short

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

The idea behind Pimco Small Cap and Pimco Short Asset 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.