Correlation Between Fundamental Indexplus and Pimco Stocksplus

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

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

Diversification Opportunities for Fundamental Indexplus and Pimco Stocksplus

0.6

Correlation Coefficient

Fundamental Indexplus  Pimco Stocksplus

Poor diversification

The 3 months correlation between Fundamental and PIMCO is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Indexplus Tr and Pimco Stocksplus Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Stocksplus Small and Fundamental Indexplus 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 Fundamental Indexplus Tr 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 Small has no effect on the direction of Fundamental Indexplus i.e., Fundamental Indexplus and Pimco Stocksplus go up and down completely randomly.

Pair Corralation between Fundamental Indexplus and Pimco Stocksplus

Assuming the 90 days horizon Fundamental Indexplus Tr is expected to generate 0.72 times more return on investment than Pimco Stocksplus. However, Fundamental Indexplus Tr is 1.39 times less risky than Pimco Stocksplus. It trades about -0.02 of its potential returns per unit of risk. Pimco Stocksplus Small is currently generating about -0.11 per unit of risk. If you would invest  1,714  in Fundamental Indexplus Tr on December 23, 2024 and sell it today you would lose (23.00) from holding Fundamental Indexplus Tr or give up 1.34% of portfolio value over 90 days.

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

Fundamental Indexplus Tr  vs.  Pimco Stocksplus Small

Fundamental Indexplus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundamental Indexplus Tr has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fundamental Indexplus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Stocksplus Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco Stocksplus Small 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 Fundamental Indexplus and Pimco Stocksplus

The main advantage of trading using opposite Fundamental Indexplus and Pimco Stocksplus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundamental Indexplus 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 Fundamental Indexplus Tr and Pimco Stocksplus Small 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.