Correlation Between Pimco Small and Stocksplus Total

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

Diversification Opportunities for Pimco Small and Stocksplus Total

0.83

Correlation Coefficient

Pimco Small  Stocksplus Total

Very poor diversification

The 3 months correlation between Pimco and Stocksplus is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Small Cap and Stocksplus Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stocksplus Total Return 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 Stocksplus Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stocksplus Total Return has no effect on the direction of Pimco Small i.e., Pimco Small and Stocksplus Total go up and down completely randomly.

Pair Corralation between Pimco Small and Stocksplus Total

Assuming the 90 days horizon Pimco Small Cap is expected to under-perform the Stocksplus Total. In addition to that, Pimco Small is 1.2 times more volatile than Stocksplus Total Return. It trades about -0.11 of its total potential returns per unit of risk. Stocksplus Total Return is currently generating about -0.04 per unit of volatility. If you would invest  1,245  in Stocksplus Total Return on December 30, 2024 and sell it today you would lose (35.00) from holding Stocksplus Total Return or give up 2.81% of portfolio value over 90 days.

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

Pimco Small Cap  vs.  Stocksplus Total Return

Pimco Small Cap

Risk-Adjusted Performance

Very Weak

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

Stocksplus Total Return

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stocksplus Total Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Stocksplus Total 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 Stocksplus Total

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

The idea behind Pimco Small Cap and Stocksplus Total Return 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.