Correlation Between Mid Cap and Pimco Short

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

By analyzing existing cross correlation between Mid Cap 15x Strategy and Pimco Short Asset, you can compare the effects of market volatilities on Mid Cap 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 Mid Cap with a short position of Pimco Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Pimco Short.

Diversification Opportunities for Mid Cap and Pimco Short

0.77

Correlation Coefficient

Mid Cap  Pimco Short

Poor diversification

The 3 months correlation between Mid and Pimco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy 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 Mid Cap 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 Mid Cap 15x Strategy 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 Mid Cap i.e., Mid Cap and Pimco Short go up and down completely randomly.

Pair Corralation between Mid Cap and Pimco Short

Assuming the 90 days horizon Mid Cap 15x Strategy is expected to generate 17.07 times more return on investment than Pimco Short. However, Mid Cap is 17.07 times more volatile than Pimco Short Asset. It trades about 0.11 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  12,932  in Mid Cap 15x Strategy on September 16, 2024 and sell it today you would earn a total of  1,246  from holding Mid Cap 15x Strategy or generate 9.64% return on investment over 90 days.

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

Mid Cap 15x Strategy  vs.  Pimco Short Asset

Mid Cap 15x

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap 15x Strategy are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Mid Cap 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 Mid Cap and Pimco Short

The main advantage of trading using opposite Mid Cap and Pimco Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap 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 Mid Cap 15x Strategy 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.