Correlation Between Invesco California and Pimco California

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

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

Diversification Opportunities for Invesco California and Pimco California

0.63

Correlation Coefficient

Invesco California  Pimco California

Poor diversification

The 3 months correlation between Invesco and Pimco is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Invesco California Value and Pimco California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco California Mun and Invesco California 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 Invesco California Value are associated (or correlated) with Pimco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco California Mun has no effect on the direction of Invesco California i.e., Invesco California and Pimco California go up and down completely randomly.

Pair Corralation between Invesco California and Pimco California

Considering the 90-day investment horizon Invesco California Value is expected to under-perform the Pimco California. In addition to that, Invesco California is 1.25 times more volatile than Pimco California Municipal. It trades about -0.02 of its total potential returns per unit of risk. Pimco California Municipal is currently generating about 0.0 per unit of volatility. If you would invest  722.00  in Pimco California Municipal on September 3, 2024 and sell it today you would lose (2.00) from holding Pimco California Municipal or give up 0.28% of portfolio value over 90 days.

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

Invesco California Value  vs.  Pimco California Municipal

Invesco California Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco California Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Invesco California is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pimco California Mun

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco California Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound basic indicators, Pimco California is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco California and Pimco California

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

The idea behind Invesco California Value and Pimco California Municipal 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.