Correlation Between Prudential Real and Pimco Credit

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

By analyzing existing cross correlation between Prudential Real Estate and Pimco Credit Absolute, you can compare the effects of market volatilities on Prudential Real and Pimco Credit 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 Prudential Real with a short position of Pimco Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Real and Pimco Credit.

Diversification Opportunities for Prudential Real and Pimco Credit

0.25

Correlation Coefficient

Prudential Real  Pimco Credit

Modest diversification

The 3 months correlation between Prudential and Pimco is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Real Estate and Pimco Credit Absolute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Credit Absolute and Prudential Real 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 Prudential Real Estate are associated (or correlated) with Pimco Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Credit Absolute has no effect on the direction of Prudential Real i.e., Prudential Real and Pimco Credit go up and down completely randomly.

Pair Corralation between Prudential Real and Pimco Credit

Assuming the 90 days horizon Prudential Real Estate is expected to under-perform the Pimco Credit. In addition to that, Prudential Real is 6.48 times more volatile than Pimco Credit Absolute. It trades about -0.01 of its total potential returns per unit of risk. Pimco Credit Absolute is currently generating about 0.28 per unit of volatility. If you would invest  950.00  in Pimco Credit Absolute on December 30, 2024 and sell it today you would earn a total of  21.00  from holding Pimco Credit Absolute or generate 2.21% return on investment over 90 days.

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

Prudential Real Estate  vs.  Pimco Credit Absolute

Prudential Real Estate

Risk-Adjusted Performance

Very Weak

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

Pimco Credit Absolute

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Credit Absolute are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prudential Real and Pimco Credit

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

The idea behind Prudential Real Estate and Pimco Credit Absolute 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.