Correlation Between Small Midcap and Pimco Trends

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

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

Diversification Opportunities for Small Midcap and Pimco Trends

-0.43

Correlation Coefficient

Small Midcap  Pimco Trends

Very good diversification

The 3 months correlation between Small and Pimco is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Small Midcap Dividend Income and Pimco Trends Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Trends Managed and Small Midcap 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 Small Midcap Dividend Income are associated (or correlated) with Pimco Trends. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Trends Managed has no effect on the direction of Small Midcap i.e., Small Midcap and Pimco Trends go up and down completely randomly.

Pair Corralation between Small Midcap and Pimco Trends

Assuming the 90 days horizon Small Midcap Dividend Income is expected to under-perform the Pimco Trends. In addition to that, Small Midcap is 1.97 times more volatile than Pimco Trends Managed. It trades about -0.01 of its total potential returns per unit of risk. Pimco Trends Managed is currently generating about 0.11 per unit of volatility. If you would invest  999.00  in Pimco Trends Managed on October 21, 2024 and sell it today you would earn a total of  39.00  from holding Pimco Trends Managed or generate 3.9% return on investment over 90 days.

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

Small Midcap Dividend Income  vs.  Pimco Trends Managed

Small Midcap Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pimco Trends Managed

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Trends Managed are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Trends is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Midcap and Pimco Trends

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

The idea behind Small Midcap Dividend Income and Pimco Trends Managed 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.