Correlation Between Pimco Emerging and Pimco Small

Can any of the company-specific risk be diversified away by investing in both Pimco Emerging 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 Emerging 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 Emerging Markets and Pimco Small Cap, you can compare the effects of market volatilities on Pimco Emerging 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 Emerging with a short position of Pimco Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Emerging and Pimco Small.

Diversification Opportunities for Pimco Emerging and Pimco Small

-0.62

Correlation Coefficient

Pimco Emerging  Pimco Small

Excellent diversification

The 3 months correlation between Pimco and Pimco is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Emerging Markets 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 Emerging 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 Emerging Markets 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 Emerging i.e., Pimco Emerging and Pimco Small go up and down completely randomly.

Pair Corralation between Pimco Emerging and Pimco Small

Assuming the 90 days horizon Pimco Emerging Markets is expected to generate 0.22 times more return on investment than Pimco Small. However, Pimco Emerging Markets is 4.53 times less risky than Pimco Small. It trades about 0.24 of its potential returns per unit of risk. Pimco Small Cap is currently generating about -0.09 per unit of risk. If you would invest  589.00  in Pimco Emerging Markets on December 26, 2024 and sell it today you would earn a total of  24.00  from holding Pimco Emerging Markets or generate 4.07% return on investment over 90 days.

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

Pimco Emerging Markets  vs.  Pimco Small Cap

Pimco Emerging Markets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Emerging Markets are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pimco Emerging 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

Very Weak

Over the last 90 days Pimco Small Cap 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.

Pair Trading with Pimco Emerging and Pimco Small

The main advantage of trading using opposite Pimco Emerging and Pimco Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pimco Emerging 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 Emerging Markets 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.