Correlation Between RBC PHN and PIMCO Global

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

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

Diversification Opportunities for RBC PHN and PIMCO Global

0.85

Correlation Coefficient

RBC PHN  PIMCO Global

Very poor diversification

The 3 months correlation between RBC and PIMCO is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding RBC PHN Short and PIMCO Global Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Global Short and RBC PHN 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 PHN Short are associated (or correlated) with PIMCO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Global Short has no effect on the direction of RBC PHN i.e., RBC PHN and PIMCO Global go up and down completely randomly.

Pair Corralation between RBC PHN and PIMCO Global

Assuming the 90 days trading horizon RBC PHN Short is expected to generate 1.14 times more return on investment than PIMCO Global. However, RBC PHN is 1.14 times more volatile than PIMCO Global Short. It trades about 0.13 of its potential returns per unit of risk. PIMCO Global Short is currently generating about 0.05 per unit of risk. If you would invest  1,983  in RBC PHN Short on December 29, 2024 and sell it today you would earn a total of  26.00  from holding RBC PHN Short or generate 1.31% return on investment over 90 days.

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

RBC PHN Short  vs.  PIMCO Global Short

RBC PHN Short

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC PHN Short are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RBC PHN is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

PIMCO Global Short

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Global Short are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, PIMCO Global 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 PHN and PIMCO Global

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

The idea behind RBC PHN Short and PIMCO Global Short 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.