Correlation Between Pimco Rae and Commodityrealreturn

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

Diversification Opportunities for Pimco Rae and Commodityrealreturn

0.14

Correlation Coefficient

Pimco Rae  Commodityrealreturn

Average diversification

The 3 months correlation between Pimco and Commodityrealreturn is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Rae Worldwide and Commodityrealreturn Strategy F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodityrealreturn 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 Commodityrealreturn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodityrealreturn has no effect on the direction of Pimco Rae i.e., Pimco Rae and Commodityrealreturn go up and down completely randomly.

Pair Corralation between Pimco Rae and Commodityrealreturn

Assuming the 90 days horizon Pimco Rae Worldwide is expected to under-perform the Commodityrealreturn. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pimco Rae Worldwide is 2.15 times less risky than Commodityrealreturn. The mutual fund trades about -0.47 of its potential returns per unit of risk. The Commodityrealreturn Strategy Fund is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,312  in Commodityrealreturn Strategy Fund on September 24, 2024 and sell it today you would lose (12.00) from holding Commodityrealreturn Strategy Fund or give up 0.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Pimco Rae Worldwide  vs.  Commodityrealreturn Strategy F

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

Commodityrealreturn

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Pimco Rae Worldwide and Commodityrealreturn Strategy Fund 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.