Correlation Between Mid Cap and Pimco Fundamental

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

By analyzing existing cross correlation between Mid Cap 15x Strategy and Pimco Fundamental Advantage, you can compare the effects of market volatilities on Mid Cap and Pimco Fundamental 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 Mid Cap with a short position of Pimco Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Pimco Fundamental.

Diversification Opportunities for Mid Cap and Pimco Fundamental

0.16

Correlation Coefficient

Mid Cap  Pimco Fundamental

Average diversification

The 3 months correlation between Mid and Pimco is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and Pimco Fundamental Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Fundamental and Mid Cap 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 Mid Cap 15x Strategy are associated (or correlated) with Pimco Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Fundamental has no effect on the direction of Mid Cap i.e., Mid Cap and Pimco Fundamental go up and down completely randomly.

Pair Corralation between Mid Cap and Pimco Fundamental

Assuming the 90 days horizon Mid Cap 15x Strategy is expected to under-perform the Pimco Fundamental. In addition to that, Mid Cap is 3.23 times more volatile than Pimco Fundamental Advantage. It trades about -0.26 of its total potential returns per unit of risk. Pimco Fundamental Advantage is currently generating about -0.22 per unit of volatility. If you would invest  787.00  in Pimco Fundamental Advantage on October 10, 2024 and sell it today you would lose (17.00) from holding Pimco Fundamental Advantage or give up 2.16% of portfolio value over 90 days.

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

Mid Cap 15x Strategy  vs.  Pimco Fundamental Advantage

Mid Cap 15x

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap 15x Strategy are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Fundamental Advantage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pimco Fundamental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mid Cap and Pimco Fundamental

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

The idea behind Mid Cap 15x Strategy and Pimco Fundamental Advantage 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.