Correlation Between Pimco Small and Real Return

Can any of the company-specific risk be diversified away by investing in both Pimco Small and Real Return 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 Real Return 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 Real Return Asset, you can compare the effects of market volatilities on Pimco Small and Real Return 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 Real Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Small and Real Return.

Diversification Opportunities for Pimco Small and Real Return

-0.55

Correlation Coefficient

Pimco Small  Real Return

Excellent diversification

The 3 months correlation between Pimco and Real is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Small Cap and Real Return Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Return Asset 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 Real Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Return Asset has no effect on the direction of Pimco Small i.e., Pimco Small and Real Return go up and down completely randomly.

Pair Corralation between Pimco Small and Real Return

Assuming the 90 days horizon Pimco Small Cap is expected to generate 1.62 times more return on investment than Real Return. However, Pimco Small is 1.62 times more volatile than Real Return Asset. It trades about 0.09 of its potential returns per unit of risk. Real Return Asset is currently generating about -0.17 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Pimco Small Cap  vs.  Real Return Asset

Pimco Small Cap

Risk-Adjusted Performance

6 of 100

Modest

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.

Real Return Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Return Asset has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Pimco Small and Real Return

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

The idea behind Pimco Small Cap and Real Return Asset 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.