Correlation Between The National and Pimco Emerging

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

By analyzing existing cross correlation between The National Tax Free and Pimco Emerging Local, you can compare the effects of market volatilities on The National and Pimco Emerging 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 The National with a short position of Pimco Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Pimco Emerging.

Diversification Opportunities for The National and Pimco Emerging

0.59

Correlation Coefficient

The National  Pimco Emerging

Very weak diversification

The 3 months correlation between The and Pimco is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Pimco Emerging Local in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Emerging Local and The National 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 The National Tax Free are associated (or correlated) with Pimco Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Emerging Local has no effect on the direction of The National i.e., The National and Pimco Emerging go up and down completely randomly.

Pair Corralation between The National and Pimco Emerging

Assuming the 90 days horizon The National Tax Free is expected to under-perform the Pimco Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, The National Tax Free is 2.12 times less risky than Pimco Emerging. The mutual fund trades about 0.0 of its potential returns per unit of risk. The Pimco Emerging Local is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  549.00  in Pimco Emerging Local on December 29, 2024 and sell it today you would earn a total of  25.00  from holding Pimco Emerging Local or generate 4.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

The National Tax Free  vs.  Pimco Emerging Local

National Tax

Risk-Adjusted Performance

Very Weak

Over the last 90 days The National Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, The National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Emerging Local

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Emerging Local are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with The National and Pimco Emerging

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

The idea behind The National Tax Free and Pimco Emerging Local 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.