Correlation Between Microsoft and PIMCO Tactical

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

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

Diversification Opportunities for Microsoft and PIMCO Tactical

-0.21

Correlation Coefficient

Microsoft  PIMCO Tactical

Very good diversification

The 3 months correlation between Microsoft and PIMCO is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PIMCO Tactical Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Tactical Income and Microsoft 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 Microsoft are associated (or correlated) with PIMCO Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Tactical Income has no effect on the direction of Microsoft i.e., Microsoft and PIMCO Tactical go up and down completely randomly.

Pair Corralation between Microsoft and PIMCO Tactical

Given the investment horizon of 90 days Microsoft is expected to generate 1.83 times less return on investment than PIMCO Tactical. In addition to that, Microsoft is 1.67 times more volatile than PIMCO Tactical Income. It trades about 0.03 of its total potential returns per unit of risk. PIMCO Tactical Income is currently generating about 0.08 per unit of volatility. If you would invest  595.00  in PIMCO Tactical Income on October 22, 2024 and sell it today you would earn a total of  83.00  from holding PIMCO Tactical Income or generate 13.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.56%
Values	Daily Returns

Microsoft  vs.  PIMCO Tactical Income

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

PIMCO Tactical Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Tactical Income has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong forward indicators, PIMCO Tactical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and PIMCO Tactical

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

The idea behind Microsoft and PIMCO Tactical Income 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.