Correlation Between Pimco California and Invesco California

Can any of the company-specific risk be diversified away by investing in both Pimco California and Invesco California 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 Invesco California 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 Invesco California Value, you can compare the effects of market volatilities on Pimco California and Invesco California 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 Invesco California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco California and Invesco California.

Diversification Opportunities for Pimco California and Invesco California

0.63

Correlation Coefficient

Pimco California  Invesco California

Poor diversification

The 3 months correlation between Pimco and Invesco is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pimco California Municipal and Invesco California Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco California Value 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 Invesco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco California Value has no effect on the direction of Pimco California i.e., Pimco California and Invesco California go up and down completely randomly.

Pair Corralation between Pimco California and Invesco California

Considering the 90-day investment horizon Pimco California Municipal is expected to under-perform the Invesco California. But the otc fund apears to be less risky and, when comparing its historical volatility, Pimco California Municipal is 1.27 times less risky than Invesco California. The otc fund trades about -0.17 of its potential returns per unit of risk. The Invesco California Value is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,076  in Invesco California Value on August 31, 2024 and sell it today you would lose (22.00) from holding Invesco California Value or give up 2.04% of portfolio value over 90 days.

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

Pimco California Municipal  vs.  Invesco California Value

Pimco California Mun

Risk-Adjusted Performance

0 of 100

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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Invesco California Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco California Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Invesco California is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Pimco California and Invesco California

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

The idea behind Pimco California Municipal and Invesco California Value 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.