Correlation Between Pimco Diversified and Hennessy Cornerstone

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

By analyzing existing cross correlation between Pimco Diversified Income and Hennessy Nerstone Value, you can compare the effects of market volatilities on Pimco Diversified and Hennessy Cornerstone 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 Diversified with a short position of Hennessy Cornerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Diversified and Hennessy Cornerstone.

Diversification Opportunities for Pimco Diversified and Hennessy Cornerstone

0.79

Correlation Coefficient

Pimco Diversified  Hennessy Cornerstone

Poor diversification

The 3 months correlation between Pimco and Hennessy is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Diversified Income and Hennessy Nerstone Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Value and Pimco Diversified 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 Diversified Income are associated (or correlated) with Hennessy Cornerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Value has no effect on the direction of Pimco Diversified i.e., Pimco Diversified and Hennessy Cornerstone go up and down completely randomly.

Pair Corralation between Pimco Diversified and Hennessy Cornerstone

Assuming the 90 days horizon Pimco Diversified is expected to generate 1.47 times less return on investment than Hennessy Cornerstone. But when comparing it to its historical volatility, Pimco Diversified Income is 2.79 times less risky than Hennessy Cornerstone. It trades about 0.1 of its potential returns per unit of risk. Hennessy Nerstone Value is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,117  in Hennessy Nerstone Value on December 5, 2024 and sell it today you would earn a total of  46.00  from holding Hennessy Nerstone Value or generate 2.17% return on investment over 90 days.

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

Pimco Diversified Income  vs.  Hennessy Nerstone Value

Pimco Diversified Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Diversified Income are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pimco Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hennessy Nerstone Value

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Nerstone Value are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Hennessy Cornerstone 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 Diversified and Hennessy Cornerstone

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

The idea behind Pimco Diversified Income and Hennessy Nerstone 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.