Correlation Between Pimco All and Kensington Dynamic

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

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

Diversification Opportunities for Pimco All and Kensington Dynamic

-0.32

Correlation Coefficient

Pimco All  Kensington Dynamic

Very good diversification

The 3 months correlation between Pimco and Kensington is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Pimco All Asset and Kensington Dynamic Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Dynamic Growth and Pimco All 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 All Asset are associated (or correlated) with Kensington Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Dynamic Growth has no effect on the direction of Pimco All i.e., Pimco All and Kensington Dynamic go up and down completely randomly.

Pair Corralation between Pimco All and Kensington Dynamic

Assuming the 90 days horizon Pimco All Asset is expected to under-perform the Kensington Dynamic. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pimco All Asset is 1.89 times less risky than Kensington Dynamic. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Kensington Dynamic Growth is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,103  in Kensington Dynamic Growth on September 23, 2024 and sell it today you would earn a total of  72.00  from holding Kensington Dynamic Growth or generate 6.53% return on investment over 90 days.

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

Pimco All Asset  vs.  Kensington Dynamic Growth

Pimco All Asset

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kensington Dynamic Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kensington Dynamic Growth are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Kensington Dynamic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pimco All and Kensington Dynamic

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

The idea behind Pimco All Asset and Kensington Dynamic Growth 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..