Correlation Between Pimco Dynamic and Pax Small

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

Diversification Opportunities for Pimco Dynamic and Pax Small

-0.09

Correlation Coefficient

Pimco Dynamic  Pax Small

Good diversification

The 3 months correlation between Pimco and Pax is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Dynamic Income and Pax Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Small Cap 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 Pax Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Small Cap has no effect on the direction of Pimco Dynamic i.e., Pimco Dynamic and Pax Small go up and down completely randomly.

Pair Corralation between Pimco Dynamic and Pax Small

Considering the 90-day investment horizon Pimco Dynamic is expected to generate 2.01 times less return on investment than Pax Small. But when comparing it to its historical volatility, Pimco Dynamic Income is 1.86 times less risky than Pax Small. It trades about 0.06 of its potential returns per unit of risk. Pax Small Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,604  in Pax Small Cap on October 7, 2024 and sell it today you would earn a total of  142.00  from holding Pax Small Cap or generate 8.85% return on investment over 90 days.

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

Pimco Dynamic Income  vs.  Pax Small Cap

Pimco Dynamic Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Dynamic Income has generated negative risk-adjusted returns adding no value to fund investors. Despite latest abnormal performance, the Fund's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the fund traders.

Pax Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Small Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pax Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pimco Dynamic and Pax Small

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

The idea behind Pimco Dynamic Income and Pax Small Cap 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.