Correlation Between Pimco Energy and World Energy

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

By analyzing existing cross correlation between Pimco Energy Tactical and World Energy Fund, you can compare the effects of market volatilities on Pimco Energy and World Energy 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 Energy with a short position of World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Energy and World Energy.

Diversification Opportunities for Pimco Energy and World Energy

0.65

Correlation Coefficient

Pimco Energy  World Energy

Poor diversification

The 3 months correlation between Pimco and World is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Energy Tactical and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy and Pimco Energy 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 Energy Tactical are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Pimco Energy i.e., Pimco Energy and World Energy go up and down completely randomly.

Pair Corralation between Pimco Energy and World Energy

Considering the 90-day investment horizon Pimco Energy is expected to generate 1.92 times less return on investment than World Energy. In addition to that, Pimco Energy is 7.1 times more volatile than World Energy Fund. It trades about 0.06 of its total potential returns per unit of risk. World Energy Fund is currently generating about 0.76 per unit of volatility. If you would invest  1,449  in World Energy Fund on October 27, 2024 and sell it today you would earn a total of  173.00  from holding World Energy Fund or generate 11.94% return on investment over 90 days.

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

Pimco Energy Tactical  vs.  World Energy Fund

Pimco Energy Tactical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Energy Tactical are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Pimco Energy showed solid returns over the last few months and may actually be approaching a breakup point.

World Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in World Energy Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, World Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pimco Energy and World Energy

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

The idea behind Pimco Energy Tactical and World Energy Fund 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.