Correlation Between Pimco California and Tekla Healthcare

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

By analyzing existing cross correlation between Pimco California Municipal and Tekla Healthcare Investors, you can compare the effects of market volatilities on Pimco California and Tekla Healthcare 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 California with a short position of Tekla Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco California and Tekla Healthcare.

Diversification Opportunities for Pimco California and Tekla Healthcare

0.59

Correlation Coefficient

Pimco California  Tekla Healthcare

Very weak diversification

The 3 months correlation between Pimco and Tekla is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Pimco California Municipal and Tekla Healthcare Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Healthcare Inv and Pimco California 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 California Municipal are associated (or correlated) with Tekla Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla Healthcare Inv has no effect on the direction of Pimco California i.e., Pimco California and Tekla Healthcare go up and down completely randomly.

Pair Corralation between Pimco California and Tekla Healthcare

Considering the 90-day investment horizon Pimco California is expected to generate 7.35 times less return on investment than Tekla Healthcare. But when comparing it to its historical volatility, Pimco California Municipal is 1.44 times less risky than Tekla Healthcare. It trades about 0.01 of its potential returns per unit of risk. Tekla Healthcare Investors is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,603  in Tekla Healthcare Investors on December 26, 2024 and sell it today you would earn a total of  55.00  from holding Tekla Healthcare Investors or generate 3.43% return on investment over 90 days.

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

Pimco California Municipal  vs.  Tekla Healthcare Investors

Pimco California Mun

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco California Municipal has generated negative risk-adjusted returns adding no value to fund investors. Despite quite persistent fundamental indicators, Pimco California is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Tekla Healthcare Inv

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tekla Healthcare Investors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Tekla Healthcare is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Pimco California and Tekla Healthcare

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

The idea behind Pimco California Municipal and Tekla Healthcare Investors 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.