Correlation Between Nasdaq and Pimco Small

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

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

Diversification Opportunities for Nasdaq and Pimco Small

0.38

Correlation Coefficient

Nasdaq  Pimco Small

Weak diversification

The 3 months correlation between Nasdaq and Pimco is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Pimco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Small Cap and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Pimco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Small Cap has no effect on the direction of Nasdaq i.e., Nasdaq and Pimco Small go up and down completely randomly.

Pair Corralation between Nasdaq and Pimco Small

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 1.08 times more return on investment than Pimco Small. However, Nasdaq is 1.08 times more volatile than Pimco Small Cap. It trades about 0.01 of its potential returns per unit of risk. Pimco Small Cap is currently generating about -0.26 per unit of risk. If you would invest  8,192  in Nasdaq Inc on December 5, 2024 and sell it today you would earn a total of  5.00  from holding Nasdaq Inc or generate 0.06% return on investment over 90 days.

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

Nasdaq Inc  vs.  Pimco Small Cap

Nasdaq Inc

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pimco Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Nasdaq and Pimco Small

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

The idea behind Nasdaq Inc and Pimco Small Cap 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.