Correlation Between Pimco Energy and Diamond Hill

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

Diversification Opportunities for Pimco Energy and Diamond Hill

-0.06

Correlation Coefficient

Pimco Energy  Diamond Hill

Good diversification

The 3 months correlation between Pimco and Diamond is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Energy Tactical and Diamond Hill Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Small 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 Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Small has no effect on the direction of Pimco Energy i.e., Pimco Energy and Diamond Hill go up and down completely randomly.

Pair Corralation between Pimco Energy and Diamond Hill

Considering the 90-day investment horizon Pimco Energy Tactical is expected to generate 0.74 times more return on investment than Diamond Hill. However, Pimco Energy Tactical is 1.35 times less risky than Diamond Hill. It trades about 0.12 of its potential returns per unit of risk. Diamond Hill Small is currently generating about -0.01 per unit of risk. If you would invest  1,364  in Pimco Energy Tactical on October 11, 2024 and sell it today you would earn a total of  1,231  from holding Pimco Energy Tactical or generate 90.25% return on investment over 90 days.

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

Pimco Energy Tactical  vs.  Diamond Hill Small

Pimco Energy Tactical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Energy Tactical are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Pimco Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Diamond Hill Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Hill Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Pimco Energy and Diamond Hill

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

The idea behind Pimco Energy Tactical and Diamond Hill Small 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.