Correlation Between Long Term and Pimco Rae

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

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

Diversification Opportunities for Long Term and Pimco Rae

0.76

Correlation Coefficient

Long Term  Pimco Rae

Poor diversification

The 3 months correlation between Long and Pimco is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Long Term Government Fund and Pimco Rae Fundamental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Rae Fundamental and Long Term 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 Long Term Government Fund 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 Fundamental has no effect on the direction of Long Term i.e., Long Term and Pimco Rae go up and down completely randomly.

Pair Corralation between Long Term and Pimco Rae

Assuming the 90 days horizon Long Term Government Fund is expected to under-perform the Pimco Rae. But the mutual fund apears to be less risky and, when comparing its historical volatility, Long Term Government Fund is 1.14 times less risky than Pimco Rae. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Pimco Rae Fundamental is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,126  in Pimco Rae Fundamental on September 25, 2024 and sell it today you would lose (81.00) from holding Pimco Rae Fundamental or give up 7.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Long Term Government Fund  vs.  Pimco Rae Fundamental

Long Term Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Long Term Government Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pimco Rae Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Rae Fundamental has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators 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 Long Term and Pimco Rae

The main advantage of trading using opposite Long Term and Pimco Rae positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long Term 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 Long Term Government Fund and Pimco Rae Fundamental 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.