Correlation Between Pimco Energy and Federated Max-cap

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

Diversification Opportunities for Pimco Energy and Federated Max-cap

-0.4

Correlation Coefficient

Pimco Energy  Federated Max-cap

Very good diversification

The 3 months correlation between Pimco and Federated is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Energy Tactical and Federated Max Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Max Cap 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 Federated Max-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Max Cap has no effect on the direction of Pimco Energy i.e., Pimco Energy and Federated Max-cap go up and down completely randomly.

Pair Corralation between Pimco Energy and Federated Max-cap

Considering the 90-day investment horizon Pimco Energy Tactical is expected to generate 4.93 times more return on investment than Federated Max-cap. However, Pimco Energy is 4.93 times more volatile than Federated Max Cap Index. It trades about 0.27 of its potential returns per unit of risk. Federated Max Cap Index is currently generating about 0.07 per unit of risk. If you would invest  2,580  in Pimco Energy Tactical on October 24, 2024 and sell it today you would earn a total of  596.00  from holding Pimco Energy Tactical or generate 23.1% return on investment over 90 days.

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

Pimco Energy Tactical  vs.  Federated Max Cap Index

Pimco Energy Tactical

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Energy Tactical are ranked lower than 17 (%) 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.

Federated Max Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Max Cap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Pimco Energy and Federated Max-cap

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

The idea behind Pimco Energy Tactical and Federated Max Cap Index 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .