Correlation Between PIMCO 0 and Invesco Fundamental

Can any of the company-specific risk be diversified away by investing in both PIMCO 0 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 0 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 0 5 Year and Invesco Fundamental High, you can compare the effects of market volatilities on PIMCO 0 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 0 with a short position of Invesco Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO 0 and Invesco Fundamental.

Diversification Opportunities for PIMCO 0 and Invesco Fundamental

0.85

Correlation Coefficient

PIMCO 0  Invesco Fundamental

Very poor diversification

The 3 months correlation between PIMCO and Invesco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO 0 5 Year and Invesco Fundamental High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Fundamental High and PIMCO 0 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 0 5 Year 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 High has no effect on the direction of PIMCO 0 i.e., PIMCO 0 and Invesco Fundamental go up and down completely randomly.

Pair Corralation between PIMCO 0 and Invesco Fundamental

Considering the 90-day investment horizon PIMCO 0 5 Year is expected to generate 0.95 times more return on investment than Invesco Fundamental. However, PIMCO 0 5 Year is 1.06 times less risky than Invesco Fundamental. It trades about 0.13 of its potential returns per unit of risk. Invesco Fundamental High is currently generating about 0.06 per unit of risk. If you would invest  9,339  in PIMCO 0 5 Year on December 2, 2024 and sell it today you would earn a total of  196.00  from holding PIMCO 0 5 Year or generate 2.1% return on investment over 90 days.

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

PIMCO 0 5 Year  vs.  Invesco Fundamental High

PIMCO 0 5

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO 0 5 Year are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PIMCO 0 is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco Fundamental High

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Fundamental High are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Invesco Fundamental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PIMCO 0 and Invesco Fundamental

The main advantage of trading using opposite PIMCO 0 and Invesco Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO 0 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 0 5 Year and Invesco Fundamental High 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.