Correlation Between Real Return and Pimco Rae

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

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

Diversification Opportunities for Real Return and Pimco Rae

0.95

Correlation Coefficient

Real Return  Pimco Rae

Almost no diversification

The 3 months correlation between Real and Pimco is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Real Return Fund and Pimco Rae Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Rae Worldwide and Real Return 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 Real Return Fund are associated (or correlated) with Pimco Rae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Rae Worldwide has no effect on the direction of Real Return i.e., Real Return and Pimco Rae go up and down completely randomly.

Pair Corralation between Real Return and Pimco Rae

Assuming the 90 days horizon Real Return is expected to generate 2.3 times less return on investment than Pimco Rae. But when comparing it to its historical volatility, Real Return Fund is 2.02 times less risky than Pimco Rae. It trades about 0.17 of its potential returns per unit of risk. Pimco Rae Worldwide is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  738.00  in Pimco Rae Worldwide on December 25, 2024 and sell it today you would earn a total of  50.00  from holding Pimco Rae Worldwide or generate 6.78% return on investment over 90 days.

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

Real Return Fund  vs.  Pimco Rae Worldwide

Real Return Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Real Return Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Real Return is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Rae Worldwide

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Rae Worldwide are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pimco Rae may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Real Return and Pimco Rae

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

The idea behind Real Return Fund and Pimco Rae Worldwide 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.