Correlation Between Pimco Rae and Pimco Equity

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

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

Diversification Opportunities for Pimco Rae and Pimco Equity

0.78

Correlation Coefficient

Pimco Rae  Pimco Equity

Poor diversification

The 3 months correlation between Pimco and Pimco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Rae Worldwide and Pimco Equity Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Equity Series and Pimco Rae 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 Rae Worldwide are associated (or correlated) with Pimco Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Equity Series has no effect on the direction of Pimco Rae i.e., Pimco Rae and Pimco Equity go up and down completely randomly.

Pair Corralation between Pimco Rae and Pimco Equity

Assuming the 90 days horizon Pimco Rae is expected to generate 3.59 times less return on investment than Pimco Equity. But when comparing it to its historical volatility, Pimco Rae Worldwide is 1.32 times less risky than Pimco Equity. It trades about 0.03 of its potential returns per unit of risk. Pimco Equity Series is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,023  in Pimco Equity Series on October 11, 2024 and sell it today you would earn a total of  285.00  from holding Pimco Equity Series or generate 27.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Pimco Rae Worldwide  vs.  Pimco Equity Series

Pimco Rae Worldwide

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pimco Equity Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Equity Series has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Pimco Equity 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 Rae and Pimco Equity

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

The idea behind Pimco Rae Worldwide and Pimco Equity Series 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.