Correlation Between Pimco Short and Real Return

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

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

Diversification Opportunities for Pimco Short and Real Return

-0.83

Correlation Coefficient

Pimco Short  Real Return

Pay attention - limited upside

The 3 months correlation between Pimco and Real is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Short Asset and Real Return Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Return Asset and Pimco Short 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 Pimco Short Asset are associated (or correlated) with Real Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Return Asset has no effect on the direction of Pimco Short i.e., Pimco Short and Real Return go up and down completely randomly.

Pair Corralation between Pimco Short and Real Return

Assuming the 90 days horizon Pimco Short Asset is not expected to generate positive returns. However, Pimco Short Asset is 13.07 times less risky than Real Return. It waists most of its returns potential to compensate for thr risk taken. Real Return is generating about 0.02 per unit of risk. If you would invest  1,192  in Real Return Asset on September 16, 2024 and sell it today you would earn a total of  3.00  from holding Real Return Asset or generate 0.25% return on investment over 90 days.

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

Pimco Short Asset  vs.  Real Return Asset

Pimco Short Asset

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Short Asset are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Pimco Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Real Return Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Return Asset has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Pimco Short and Real Return

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

The idea behind Pimco Short Asset and Real Return Asset 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.