Correlation Between Pimco Income and Capital Southwest

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

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

Diversification Opportunities for Pimco Income and Capital Southwest

0.01

Correlation Coefficient

Pimco Income  Capital Southwest

Significant diversification

The 3 months correlation between Pimco and Capital is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Income Strategy and Capital Southwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Southwest and Pimco Income 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 Income Strategy are associated (or correlated) with Capital Southwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Southwest has no effect on the direction of Pimco Income i.e., Pimco Income and Capital Southwest go up and down completely randomly.

Pair Corralation between Pimco Income and Capital Southwest

Considering the 90-day investment horizon Pimco Income Strategy is expected to generate 0.29 times more return on investment than Capital Southwest. However, Pimco Income Strategy is 3.48 times less risky than Capital Southwest. It trades about 0.2 of its potential returns per unit of risk. Capital Southwest is currently generating about -0.03 per unit of risk. If you would invest  716.00  in Pimco Income Strategy on September 3, 2024 and sell it today you would earn a total of  36.00  from holding Pimco Income Strategy or generate 5.03% return on investment over 90 days.

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

Pimco Income Strategy  vs.  Capital Southwest

Pimco Income Strategy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Income Strategy are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy technical and fundamental indicators, Pimco Income is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Capital Southwest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Southwest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Capital Southwest is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pimco Income and Capital Southwest

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

The idea behind Pimco Income Strategy and Capital Southwest 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.