Correlation Between RBC Quant and PIMCO Investment

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

By analyzing existing cross correlation between RBC Quant European and PIMCO Investment Grade, you can compare the effects of market volatilities on RBC Quant and PIMCO Investment 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 RBC Quant with a short position of PIMCO Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Quant and PIMCO Investment.

Diversification Opportunities for RBC Quant and PIMCO Investment

0.84

Correlation Coefficient

RBC Quant  PIMCO Investment

Very poor diversification

The 3 months correlation between RBC and PIMCO is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding RBC Quant European and PIMCO Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Investment Grade and RBC Quant 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 RBC Quant European are associated (or correlated) with PIMCO Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Investment Grade has no effect on the direction of RBC Quant i.e., RBC Quant and PIMCO Investment go up and down completely randomly.

Pair Corralation between RBC Quant and PIMCO Investment

Assuming the 90 days trading horizon RBC Quant European is expected to generate 1.12 times more return on investment than PIMCO Investment. However, RBC Quant is 1.12 times more volatile than PIMCO Investment Grade. It trades about 0.25 of its potential returns per unit of risk. PIMCO Investment Grade is currently generating about 0.04 per unit of risk. If you would invest  2,552  in RBC Quant European on December 29, 2024 and sell it today you would earn a total of  264.00  from holding RBC Quant European or generate 10.34% return on investment over 90 days.

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

RBC Quant European  vs.  PIMCO Investment Grade

RBC Quant European

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Quant European are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, RBC Quant may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PIMCO Investment Grade

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Investment Grade are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, PIMCO Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with RBC Quant and PIMCO Investment

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

The idea behind RBC Quant European and PIMCO Investment Grade 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.