Correlation Between Pimco Trends and World Energy

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

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

Diversification Opportunities for Pimco Trends and World Energy

0.33

Correlation Coefficient

Pimco Trends  World Energy

Weak diversification

The 3 months correlation between Pimco and World is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Trends Managed and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy and Pimco Trends 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 Trends Managed are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Pimco Trends i.e., Pimco Trends and World Energy go up and down completely randomly.

Pair Corralation between Pimco Trends and World Energy

Assuming the 90 days horizon Pimco Trends Managed is expected to under-perform the World Energy. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pimco Trends Managed is 3.34 times less risky than World Energy. The mutual fund trades about -0.13 of its potential returns per unit of risk. The World Energy Fund is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,449  in World Energy Fund on December 29, 2024 and sell it today you would lose (4.00) from holding World Energy Fund or give up 0.28% of portfolio value over 90 days.

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

Pimco Trends Managed  vs.  World Energy Fund

Pimco Trends Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco Trends Managed has generated negative risk-adjusted returns adding no value to fund investors. 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.

World Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days World Energy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, World Energy 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 Trends and World Energy

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

The idea behind Pimco Trends Managed and World Energy Fund 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.