Correlation Between Pimco New and Invesco Trust

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

By analyzing existing cross correlation between Pimco New York and Invesco Trust For, you can compare the effects of market volatilities on Pimco New and Invesco Trust 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 New with a short position of Invesco Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco New and Invesco Trust.

Diversification Opportunities for Pimco New and Invesco Trust

0.74

Correlation Coefficient

Pimco New  Invesco Trust

Poor diversification

The 3 months correlation between Pimco and Invesco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Pimco New York and Invesco Trust For in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Trust For and Pimco New 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 New York are associated (or correlated) with Invesco Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Trust For has no effect on the direction of Pimco New i.e., Pimco New and Invesco Trust go up and down completely randomly.

Pair Corralation between Pimco New and Invesco Trust

Considering the 90-day investment horizon Pimco New is expected to generate 19.24 times less return on investment than Invesco Trust. But when comparing it to its historical volatility, Pimco New York is 1.01 times less risky than Invesco Trust. It trades about 0.0 of its potential returns per unit of risk. Invesco Trust For is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,033  in Invesco Trust For on December 28, 2024 and sell it today you would earn a total of  24.00  from holding Invesco Trust For or generate 2.32% return on investment over 90 days.

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

Pimco New York  vs.  Invesco Trust For

Pimco New York

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco New York has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong basic indicators, Pimco New is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Invesco Trust For

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Trust For are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Invesco Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pimco New and Invesco Trust

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

The idea behind Pimco New York and Invesco Trust For 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.