Correlation Between DTF Tax and Pimco Global

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

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

Diversification Opportunities for DTF Tax and Pimco Global

0.71

Correlation Coefficient

DTF Tax  Pimco Global

Poor diversification

The 3 months correlation between DTF and Pimco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding DTF Tax Free and Pimco Global Stocksplus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Global Stocksplus and DTF Tax 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 DTF Tax Free are associated (or correlated) with Pimco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Global Stocksplus has no effect on the direction of DTF Tax i.e., DTF Tax and Pimco Global go up and down completely randomly.

Pair Corralation between DTF Tax and Pimco Global

Considering the 90-day investment horizon DTF Tax is expected to generate 2.49 times less return on investment than Pimco Global. But when comparing it to its historical volatility, DTF Tax Free is 1.97 times less risky than Pimco Global. It trades about 0.12 of its potential returns per unit of risk. Pimco Global Stocksplus is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  761.00  in Pimco Global Stocksplus on December 26, 2024 and sell it today you would earn a total of  48.00  from holding Pimco Global Stocksplus or generate 6.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

DTF Tax Free  vs.  Pimco Global Stocksplus

DTF Tax Free

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DTF Tax Free are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DTF Tax is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pimco Global Stocksplus

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Global Stocksplus are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Pimco Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with DTF Tax and Pimco Global

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

The idea behind DTF Tax Free and Pimco Global Stocksplus 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.