Correlation Between M Large and Pimco Real

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

By analyzing existing cross correlation between M Large Cap and Pimco Real Return, you can compare the effects of market volatilities on M Large and Pimco Real 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 M Large with a short position of Pimco Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Large and Pimco Real.

Diversification Opportunities for M Large and Pimco Real

-0.7

Correlation Coefficient

M Large  Pimco Real

Excellent diversification

The 3 months correlation between MTCGX and Pimco is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Pimco Real Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Real Return and M Large 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 M Large Cap are associated (or correlated) with Pimco Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Real Return has no effect on the direction of M Large i.e., M Large and Pimco Real go up and down completely randomly.

Pair Corralation between M Large and Pimco Real

Assuming the 90 days horizon M Large Cap is expected to generate 1.21 times more return on investment than Pimco Real. However, M Large is 1.21 times more volatile than Pimco Real Return. It trades about 0.22 of its potential returns per unit of risk. Pimco Real Return is currently generating about -0.02 per unit of risk. If you would invest  3,610  in M Large Cap on September 19, 2024 and sell it today you would earn a total of  143.00  from holding M Large Cap or generate 3.96% return on investment over 90 days.

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

M Large Cap  vs.  Pimco Real Return

M Large Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M Large Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, M Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Real Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Real Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with M Large and Pimco Real

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

The idea behind M Large Cap and Pimco Real Return 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.