Correlation Between Stone Ridge and Pimco Dynamic

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

By analyzing existing cross correlation between Stone Ridge High and Pimco Dynamic Income, you can compare the effects of market volatilities on Stone Ridge and Pimco Dynamic 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 Stone Ridge with a short position of Pimco Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Pimco Dynamic.

Diversification Opportunities for Stone Ridge and Pimco Dynamic

-0.23

Correlation Coefficient

Stone Ridge  Pimco Dynamic

Very good diversification

The 3 months correlation between Stone and Pimco is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge High and Pimco Dynamic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Dynamic Income and Stone Ridge 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 Stone Ridge High are associated (or correlated) with Pimco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Dynamic Income has no effect on the direction of Stone Ridge i.e., Stone Ridge and Pimco Dynamic go up and down completely randomly.

Pair Corralation between Stone Ridge and Pimco Dynamic

Assuming the 90 days horizon Stone Ridge High is expected to under-perform the Pimco Dynamic. But the mutual fund apears to be less risky and, when comparing its historical volatility, Stone Ridge High is 1.34 times less risky than Pimco Dynamic. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Pimco Dynamic Income is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  1,782  in Pimco Dynamic Income on December 27, 2024 and sell it today you would earn a total of  193.00  from holding Pimco Dynamic Income or generate 10.83% return on investment over 90 days.

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

Stone Ridge High  vs.  Pimco Dynamic Income

Stone Ridge High

Risk-Adjusted Performance

Very Weak

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

Pimco Dynamic Income

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Dynamic Income are ranked lower than 33 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly unfluctuating fundamental indicators, Pimco Dynamic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Stone Ridge and Pimco Dynamic

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

The idea behind Stone Ridge High and Pimco Dynamic Income 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.