Correlation Between Long-term and Pimco Stocksplus

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

Diversification Opportunities for Long-term and Pimco Stocksplus

0.64

Correlation Coefficient

Long-term  Pimco Stocksplus

Poor diversification

The 3 months correlation between Long-term and Pimco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Long Term Government Fund and Pimco Stocksplus Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Stocksplus Short 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 Stocksplus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Stocksplus Short has no effect on the direction of Long-term i.e., Long-term and Pimco Stocksplus go up and down completely randomly.

Pair Corralation between Long-term and Pimco Stocksplus

Assuming the 90 days horizon Long-term is expected to generate 1.5 times less return on investment than Pimco Stocksplus. But when comparing it to its historical volatility, Long Term Government Fund is 1.35 times less risky than Pimco Stocksplus. It trades about 0.09 of its potential returns per unit of risk. Pimco Stocksplus Short is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  705.00  in Pimco Stocksplus Short on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Pimco Stocksplus Short or generate 5.96% return on investment over 90 days.

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

Long Term Government Fund  vs.  Pimco Stocksplus Short

Long Term Government

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Long Term Government Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Long-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Stocksplus Short

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Stocksplus Short are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Stocksplus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Long-term and Pimco Stocksplus

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

The idea behind Long Term Government Fund and Pimco Stocksplus Short 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.