Correlation Between Ab Select and Pimco International

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

By analyzing existing cross correlation between Ab Select Longshort and Pimco International Bond, you can compare the effects of market volatilities on Ab Select and Pimco International 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 Ab Select with a short position of Pimco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Select and Pimco International.

Diversification Opportunities for Ab Select and Pimco International

0.51

Correlation Coefficient

Ab Select  Pimco International

Very weak diversification

The 3 months correlation between ASCLX and Pimco is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ab Select Longshort and Pimco International Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco International Bond and Ab Select 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 Ab Select Longshort are associated (or correlated) with Pimco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco International Bond has no effect on the direction of Ab Select i.e., Ab Select and Pimco International go up and down completely randomly.

Pair Corralation between Ab Select and Pimco International

Assuming the 90 days horizon Ab Select Longshort is expected to generate 2.72 times more return on investment than Pimco International. However, Ab Select is 2.72 times more volatile than Pimco International Bond. It trades about 0.21 of its potential returns per unit of risk. Pimco International Bond is currently generating about 0.16 per unit of risk. If you would invest  1,319  in Ab Select Longshort on September 5, 2024 and sell it today you would earn a total of  90.00  from holding Ab Select Longshort or generate 6.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Ab Select Longshort  vs.  Pimco International Bond

Ab Select Longshort

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Select Longshort are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Ab Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pimco International Bond

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco International Bond are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Select and Pimco International

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

The idea behind Ab Select Longshort and Pimco International Bond 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.