Correlation Between Federated Prudent and Pimco Stocksplus

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

By analyzing existing cross correlation between Federated Prudent Bear and Pimco Stocksplus Short, you can compare the effects of market volatilities on Federated Prudent and Pimco Stocksplus 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 Federated Prudent with a short position of Pimco Stocksplus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Prudent and Pimco Stocksplus.

Diversification Opportunities for Federated Prudent and Pimco Stocksplus

0.99

Correlation Coefficient

Federated Prudent  Pimco Stocksplus

No risk reduction

The 3 months correlation between Federated and Pimco is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Federated Prudent Bear and Pimco Stocksplus Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Stocksplus Short and Federated Prudent 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 Federated Prudent Bear are associated (or correlated) with Pimco Stocksplus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Stocksplus Short has no effect on the direction of Federated Prudent i.e., Federated Prudent and Pimco Stocksplus go up and down completely randomly.

Pair Corralation between Federated Prudent and Pimco Stocksplus

Assuming the 90 days horizon Federated Prudent is expected to generate 1.27 times less return on investment than Pimco Stocksplus. But when comparing it to its historical volatility, Federated Prudent Bear is 1.07 times less risky than Pimco Stocksplus. It trades about 0.11 of its potential returns per unit of risk. Pimco Stocksplus Short is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  695.00  in Pimco Stocksplus Short on December 23, 2024 and sell it today you would earn a total of  57.00  from holding Pimco Stocksplus Short or generate 8.2% return on investment over 90 days.

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

Federated Prudent Bear  vs.  Pimco Stocksplus Short

Federated Prudent Bear

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Prudent Bear are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Federated Prudent may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pimco Stocksplus Short

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Stocksplus Short are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pimco Stocksplus may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Federated Prudent and Pimco Stocksplus

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

The idea behind Federated Prudent Bear and Pimco Stocksplus Short 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.