Correlation Between PIMCO Monthly and RBC Select

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

By analyzing existing cross correlation between PIMCO Monthly Income and RBC Select Balanced, you can compare the effects of market volatilities on PIMCO Monthly and RBC Select 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 Monthly with a short position of RBC Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Monthly and RBC Select.

Diversification Opportunities for PIMCO Monthly and RBC Select

0.27

Correlation Coefficient

PIMCO Monthly  RBC Select

Modest diversification

The 3 months correlation between PIMCO and RBC is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Monthly Income and RBC Select Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Select Balanced and PIMCO Monthly 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 Monthly Income are associated (or correlated) with RBC Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Select Balanced has no effect on the direction of PIMCO Monthly i.e., PIMCO Monthly and RBC Select go up and down completely randomly.

Pair Corralation between PIMCO Monthly and RBC Select

Assuming the 90 days trading horizon PIMCO Monthly Income is expected to generate 0.37 times more return on investment than RBC Select. However, PIMCO Monthly Income is 2.73 times less risky than RBC Select. It trades about -0.42 of its potential returns per unit of risk. RBC Select Balanced is currently generating about -0.31 per unit of risk. If you would invest  1,267  in PIMCO Monthly Income on October 2, 2024 and sell it today you would lose (33.00) from holding PIMCO Monthly Income or give up 2.6% of portfolio value over 90 days.

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

PIMCO Monthly Income  vs.  RBC Select Balanced

PIMCO Monthly Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Monthly Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable basic indicators, PIMCO Monthly is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

RBC Select Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RBC Select Balanced has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, RBC Select 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 Monthly and RBC Select

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

The idea behind PIMCO Monthly Income and RBC Select Balanced 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.