Correlation Between Pimco Fundamental and Pimco Rae

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

Diversification Opportunities for Pimco Fundamental and Pimco Rae

0.91

Correlation Coefficient

Pimco Fundamental  Pimco Rae

Almost no diversification

The 3 months correlation between Pimco and Pimco is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Fundamental Advantage and Pimco Rae Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Rae Worldwide 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 Rae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Rae Worldwide has no effect on the direction of Pimco Fundamental i.e., Pimco Fundamental and Pimco Rae go up and down completely randomly.

Pair Corralation between Pimco Fundamental and Pimco Rae

Assuming the 90 days horizon Pimco Fundamental Advantage is expected to generate 1.16 times more return on investment than Pimco Rae. However, Pimco Fundamental is 1.16 times more volatile than Pimco Rae Worldwide. It trades about 0.18 of its potential returns per unit of risk. Pimco Rae Worldwide is currently generating about 0.2 per unit of risk. If you would invest  747.00  in Pimco Fundamental Advantage on December 29, 2024 and sell it today you would earn a total of  54.00  from holding Pimco Fundamental Advantage or generate 7.23% return on investment over 90 days.

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

Pimco Fundamental Advantage  vs.  Pimco Rae Worldwide

Pimco Fundamental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Fundamental Advantage are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pimco Fundamental may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pimco Rae Worldwide

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Rae Worldwide are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Pimco Rae may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pimco Fundamental and Pimco Rae

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

The idea behind Pimco Fundamental Advantage and Pimco Rae Worldwide 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.