Correlation Between Midcap Value and Pimco High

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

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

Diversification Opportunities for Midcap Value and Pimco High

-0.36

Correlation Coefficient

Midcap Value  Pimco High

Very good diversification

The 3 months correlation between Midcap and Pimco is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Value Fund and Pimco High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco High Income and Midcap Value 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 Midcap Value Fund are associated (or correlated) with Pimco High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco High Income has no effect on the direction of Midcap Value i.e., Midcap Value and Pimco High go up and down completely randomly.

Pair Corralation between Midcap Value and Pimco High

Assuming the 90 days horizon Midcap Value Fund is expected to under-perform the Pimco High. In addition to that, Midcap Value is 2.22 times more volatile than Pimco High Income. It trades about -0.01 of its total potential returns per unit of risk. Pimco High Income is currently generating about 0.13 per unit of volatility. If you would invest  473.00  in Pimco High Income on December 28, 2024 and sell it today you would earn a total of  14.00  from holding Pimco High Income or generate 2.96% return on investment over 90 days.

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

Midcap Value Fund  vs.  Pimco High Income

Midcap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Midcap Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Midcap Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco High Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco High Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent technical indicators, Pimco High is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Midcap Value and Pimco High

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

The idea behind Midcap Value Fund and Pimco High 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.