Correlation Between Pimco Small and Fundamental Indexplus

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

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

Diversification Opportunities for Pimco Small and Fundamental Indexplus

0.85

Correlation Coefficient

Pimco Small  Fundamental Indexplus

Very poor diversification

The 3 months correlation between Pimco and Fundamental is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Small Cap and Fundamental Indexplus Tr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Indexplus and Pimco Small 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 Small Cap are associated (or correlated) with Fundamental Indexplus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Indexplus has no effect on the direction of Pimco Small i.e., Pimco Small and Fundamental Indexplus go up and down completely randomly.

Pair Corralation between Pimco Small and Fundamental Indexplus

Assuming the 90 days horizon Pimco Small Cap is expected to generate 1.65 times more return on investment than Fundamental Indexplus. However, Pimco Small is 1.65 times more volatile than Fundamental Indexplus Tr. It trades about 0.09 of its potential returns per unit of risk. Fundamental Indexplus Tr is currently generating about 0.05 per unit of risk. If you would invest  786.00  in Pimco Small Cap on September 17, 2024 and sell it today you would earn a total of  53.00  from holding Pimco Small Cap or generate 6.74% return on investment over 90 days.

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

Pimco Small Cap  vs.  Fundamental Indexplus Tr

Pimco Small Cap

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Small Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pimco Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fundamental Indexplus

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Indexplus Tr are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fundamental Indexplus 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 Small and Fundamental Indexplus

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

The idea behind Pimco Small Cap and Fundamental Indexplus Tr 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.