Correlation Between Total Return and Pimco Rae

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

By analyzing existing cross correlation between Total Return Fund and Pimco Rae Worldwide, you can compare the effects of market volatilities on Total Return and Pimco Rae 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 Total Return with a short position of Pimco Rae. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Pimco Rae.

Diversification Opportunities for Total Return and Pimco Rae

0.23

Correlation Coefficient

Total Return  Pimco Rae

Modest diversification

The 3 months correlation between Total and Pimco is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Fund and Pimco Rae Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Rae Worldwide and Total Return 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 Total Return Fund are associated (or correlated) with Pimco Rae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Rae Worldwide has no effect on the direction of Total Return i.e., Total Return and Pimco Rae go up and down completely randomly.

Pair Corralation between Total Return and Pimco Rae

Assuming the 90 days horizon Total Return is expected to generate 2.53 times less return on investment than Pimco Rae. But when comparing it to its historical volatility, Total Return Fund is 1.25 times less risky than Pimco Rae. It trades about 0.07 of its potential returns per unit of risk. Pimco Rae Worldwide is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  711.00  in Pimco Rae Worldwide on September 2, 2024 and sell it today you would earn a total of  114.00  from holding Pimco Rae Worldwide or generate 16.03% return on investment over 90 days.

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

Total Return Fund  vs.  Pimco Rae Worldwide

Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pimco Rae Worldwide

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Rae Worldwide are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Pimco Rae is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Total Return and Pimco Rae

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

The idea behind Total Return Fund and Pimco Rae Worldwide 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.