Correlation Between PIMCO Investment and Invesco Fundamental

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

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

Diversification Opportunities for PIMCO Investment and Invesco Fundamental

0.99

Correlation Coefficient

PIMCO Investment  Invesco Fundamental

No risk reduction

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

Pair Corralation between PIMCO Investment and Invesco Fundamental

Given the investment horizon of 90 days PIMCO Investment Grade is expected to generate 1.4 times more return on investment than Invesco Fundamental. However, PIMCO Investment is 1.4 times more volatile than Invesco Fundamental Investment. It trades about 0.11 of its potential returns per unit of risk. Invesco Fundamental Investment is currently generating about 0.14 per unit of risk. If you would invest  9,448  in PIMCO Investment Grade on December 25, 2024 and sell it today you would earn a total of  193.00  from holding PIMCO Investment Grade or generate 2.04% return on investment over 90 days.

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

PIMCO Investment Grade  vs.  Invesco Fundamental Investment

PIMCO Investment Grade

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Investment Grade are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, PIMCO Investment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Invesco Fundamental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Fundamental Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Invesco Fundamental is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PIMCO Investment and Invesco Fundamental

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

The idea behind PIMCO Investment Grade and Invesco Fundamental Investment 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.