Correlation Between Pimco Fundamental and Pimco Small

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

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

Diversification Opportunities for Pimco Fundamental and Pimco Small

-0.43

Correlation Coefficient

Pimco Fundamental  Pimco Small

Very good diversification

The 3 months correlation between Pimco and Pimco is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Fundamental Advantage and Pimco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Small Cap and Pimco Fundamental 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 Fundamental Advantage are associated (or correlated) with Pimco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Small Cap has no effect on the direction of Pimco Fundamental i.e., Pimco Fundamental and Pimco Small go up and down completely randomly.

Pair Corralation between Pimco Fundamental and Pimco Small

Assuming the 90 days horizon Pimco Fundamental Advantage is expected to under-perform the Pimco Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pimco Fundamental Advantage is 1.5 times less risky than Pimco Small. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Pimco Small Cap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  777.00  in Pimco Small Cap on September 16, 2024 and sell it today you would earn a total of  18.00  from holding Pimco Small Cap or generate 2.32% return on investment over 90 days.

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

Pimco Fundamental Advantage  vs.  Pimco Small Cap

Pimco Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Fundamental Advantage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pimco Fundamental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pimco Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pimco Fundamental and Pimco Small

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

The idea behind Pimco Fundamental Advantage and Pimco 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.