Correlation Between Fundamental Large and Pimco Inflation

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

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

Diversification Opportunities for Fundamental Large and Pimco Inflation

0.11

Correlation Coefficient

Fundamental Large  Pimco Inflation

Average diversification

The 3 months correlation between Fundamental and Pimco is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Pimco Inflation Response in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Inflation Response and Fundamental Large 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 Fundamental Large Cap are associated (or correlated) with Pimco Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Inflation Response has no effect on the direction of Fundamental Large i.e., Fundamental Large and Pimco Inflation go up and down completely randomly.

Pair Corralation between Fundamental Large and Pimco Inflation

Assuming the 90 days horizon Fundamental Large Cap is expected to under-perform the Pimco Inflation. In addition to that, Fundamental Large is 3.9 times more volatile than Pimco Inflation Response. It trades about -0.09 of its total potential returns per unit of risk. Pimco Inflation Response is currently generating about 0.33 per unit of volatility. If you would invest  810.00  in Pimco Inflation Response on December 21, 2024 and sell it today you would earn a total of  43.00  from holding Pimco Inflation Response or generate 5.31% return on investment over 90 days.

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

Fundamental Large Cap  vs.  Pimco Inflation Response

Fundamental Large Cap

Risk-Adjusted Performance

Very Weak

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

Pimco Inflation Response

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Inflation Response are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Pimco Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fundamental Large and Pimco Inflation

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

The idea behind Fundamental Large Cap and Pimco Inflation Response 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.