Correlation Between Stocksplus Total and Pimco Small

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

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

Diversification Opportunities for Stocksplus Total and Pimco Small

0.92

Correlation Coefficient

Stocksplus Total  Pimco Small

Almost no diversification

The 3 months correlation between Stocksplus and Pimco is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Stocksplus Total Return and Pimco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Small Cap and Stocksplus Total 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 Stocksplus Total Return are associated (or correlated) with Pimco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Small Cap has no effect on the direction of Stocksplus Total i.e., Stocksplus Total and Pimco Small go up and down completely randomly.

Pair Corralation between Stocksplus Total and Pimco Small

Assuming the 90 days horizon Stocksplus Total is expected to generate 1.34 times less return on investment than Pimco Small. But when comparing it to its historical volatility, Stocksplus Total Return is 1.7 times less risky than Pimco Small. It trades about 0.2 of its potential returns per unit of risk. Pimco Small Cap is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  761.00  in Pimco Small Cap on September 4, 2024 and sell it today you would earn a total of  103.00  from holding Pimco Small Cap or generate 13.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Stocksplus Total Return  vs.  Pimco Small Cap

Stocksplus Total Return

Risk-Adjusted Performance

15 of 100

Good

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

Pimco Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pimco Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stocksplus Total and Pimco Small

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

The idea behind Stocksplus Total Return and Pimco Small Cap 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.