Correlation Between Principal Exchange and PIMCO Enhanced

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

By analyzing existing cross correlation between Principal Exchange Traded Funds and PIMCO Enhanced Short, you can compare the effects of market volatilities on Principal Exchange and PIMCO Enhanced 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 Principal Exchange with a short position of PIMCO Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Exchange and PIMCO Enhanced.

Diversification Opportunities for Principal Exchange and PIMCO Enhanced

0.87

Correlation Coefficient

Principal Exchange  PIMCO Enhanced

Very poor diversification

The 3 months correlation between Principal and PIMCO is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Principal Exchange Traded Fund and PIMCO Enhanced Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Enhanced Short and Principal Exchange 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 Principal Exchange Traded Funds are associated (or correlated) with PIMCO Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Enhanced Short has no effect on the direction of Principal Exchange i.e., Principal Exchange and PIMCO Enhanced go up and down completely randomly.

Pair Corralation between Principal Exchange and PIMCO Enhanced

Allowing for the 90-day total investment horizon Principal Exchange Traded Funds is expected to generate 16.25 times more return on investment than PIMCO Enhanced. However, Principal Exchange is 16.25 times more volatile than PIMCO Enhanced Short. It trades about 0.07 of its potential returns per unit of risk. PIMCO Enhanced Short is currently generating about 0.85 per unit of risk. If you would invest  2,024  in Principal Exchange Traded Funds on December 28, 2024 and sell it today you would earn a total of  31.00  from holding Principal Exchange Traded Funds or generate 1.53% return on investment over 90 days.

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

Principal Exchange Traded Fund  vs.  PIMCO Enhanced Short

Principal Exchange

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Exchange Traded Funds are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Principal Exchange is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

PIMCO Enhanced Short

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Enhanced Short are ranked lower than 66 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PIMCO Enhanced is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Principal Exchange and PIMCO Enhanced

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

The idea behind Principal Exchange Traded Funds and PIMCO Enhanced Short 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.