Correlation Between Pimco Dynamic and Ares Capital

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Can any of the company-specific risk be diversified away by investing in both Pimco Dynamic and Ares Capital 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 Dynamic and Ares Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pimco Dynamic Income and Ares Capital, you can compare the effects of market volatilities on Pimco Dynamic and Ares Capital 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 Dynamic with a short position of Ares Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Dynamic and Ares Capital.

Diversification Opportunities for Pimco Dynamic and Ares Capital

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Pimco and Ares is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Dynamic Income and Ares Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Capital and Pimco Dynamic 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 Dynamic Income are associated (or correlated) with Ares Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Capital has no effect on the direction of Pimco Dynamic i.e., Pimco Dynamic and Ares Capital go up and down completely randomly.

Pair Corralation between Pimco Dynamic and Ares Capital

Considering the 90-day investment horizon Pimco Dynamic is expected to generate 2.4 times less return on investment than Ares Capital. In addition to that, Pimco Dynamic is 1.25 times more volatile than Ares Capital. It trades about 0.06 of its total potential returns per unit of risk. Ares Capital is currently generating about 0.19 per unit of volatility. If you would invest  2,038  in Ares Capital on September 5, 2024 and sell it today you would earn a total of  172.00  from holding Ares Capital or generate 8.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Pimco Dynamic Income  vs.  Ares Capital

 Performance 
       Timeline  
Pimco Dynamic Income 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Dynamic Income are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong fundamental indicators, Pimco Dynamic is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
Ares Capital 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ares Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Ares Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pimco Dynamic and Ares Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pimco Dynamic and Ares Capital

The main advantage of trading using opposite Pimco Dynamic and Ares Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pimco Dynamic position performs unexpectedly, Ares Capital 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 Ares Capital will offset losses from the drop in Ares Capital's long position.
The idea behind Pimco Dynamic Income and Ares Capital 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.
Check out your portfolio center.
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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