Correlation Between Pimco Rae and Gnma Fund

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

Diversification Opportunities for Pimco Rae and Gnma Fund

0.42

Correlation Coefficient

Pimco Rae  Gnma Fund

Very weak diversification

The 3 months correlation between Pimco and Gnma is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Rae Worldwide and Gnma Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gnma Fund Institutional 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 Gnma Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gnma Fund Institutional has no effect on the direction of Pimco Rae i.e., Pimco Rae and Gnma Fund go up and down completely randomly.

Pair Corralation between Pimco Rae and Gnma Fund

Assuming the 90 days horizon Pimco Rae Worldwide is expected to generate 1.14 times more return on investment than Gnma Fund. However, Pimco Rae is 1.14 times more volatile than Gnma Fund Institutional. It trades about -0.08 of its potential returns per unit of risk. Gnma Fund Institutional is currently generating about -0.18 per unit of risk. If you would invest  822.00  in Pimco Rae Worldwide on September 24, 2024 and sell it today you would lose (15.00) from holding Pimco Rae Worldwide or give up 1.82% of portfolio value over 90 days.

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

Pimco Rae Worldwide  vs.  Gnma Fund Institutional

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 fairly strong forward indicators, Pimco Rae is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gnma Fund Institutional

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gnma Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Gnma Fund 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 Gnma Fund

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

The idea behind Pimco Rae Worldwide and Gnma Fund Institutional 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.