Correlation Between Pimco Income and Champlain Small

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

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

Diversification Opportunities for Pimco Income and Champlain Small

0.56

Correlation Coefficient

Pimco Income  Champlain Small

Very weak diversification

The 3 months correlation between Pimco and Champlain is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Income Fund and Champlain Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champlain Small 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 Fund are associated (or correlated) with Champlain Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champlain Small has no effect on the direction of Pimco Income i.e., Pimco Income and Champlain Small go up and down completely randomly.

Pair Corralation between Pimco Income and Champlain Small

Assuming the 90 days horizon Pimco Income is expected to generate 1.44 times less return on investment than Champlain Small. But when comparing it to its historical volatility, Pimco Income Fund is 7.25 times less risky than Champlain Small. It trades about 0.06 of its potential returns per unit of risk. Champlain Small is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,312  in Champlain Small on October 26, 2024 and sell it today you would earn a total of  5.00  from holding Champlain Small or generate 0.22% return on investment over 90 days.

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

Pimco Income Fund  vs.  Champlain Small

Pimco Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Income Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Champlain Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Pimco Income and Champlain Small

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

The idea behind Pimco Income Fund and Champlain 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.