Correlation Between Huber Capital and Pimco Rae

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

By analyzing existing cross correlation between Huber Capital Diversified and Pimco Rae Plus, you can compare the effects of market volatilities on Huber Capital and Pimco Rae 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 Huber Capital with a short position of Pimco Rae. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huber Capital and Pimco Rae.

Diversification Opportunities for Huber Capital and Pimco Rae

0.8

Correlation Coefficient

Huber Capital  Pimco Rae

Very poor diversification

The 3 months correlation between Huber and Pimco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Huber Capital Diversified and Pimco Rae Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Rae Plus and Huber Capital 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 Huber Capital Diversified are associated (or correlated) with Pimco Rae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Rae Plus has no effect on the direction of Huber Capital i.e., Huber Capital and Pimco Rae go up and down completely randomly.

Pair Corralation between Huber Capital and Pimco Rae

Assuming the 90 days horizon Huber Capital is expected to generate 1.56 times less return on investment than Pimco Rae. But when comparing it to its historical volatility, Huber Capital Diversified is 1.33 times less risky than Pimco Rae. It trades about 0.23 of its potential returns per unit of risk. Pimco Rae Plus is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,892  in Pimco Rae Plus on October 23, 2024 and sell it today you would earn a total of  77.00  from holding Pimco Rae Plus or generate 4.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

Huber Capital Diversified  vs.  Pimco Rae Plus

Huber Capital Diversified

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Huber Capital Diversified are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Huber Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Rae Plus

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Rae Plus are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Rae is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Huber Capital and Pimco Rae

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

The idea behind Huber Capital Diversified and Pimco Rae Plus 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.