Correlation Between T Rowe and Pimco California

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

By analyzing existing cross correlation between T Rowe Price and Pimco California Municipal, you can compare the effects of market volatilities on T Rowe and Pimco California 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 T Rowe with a short position of Pimco California. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rowe and Pimco California.

Diversification Opportunities for T Rowe and Pimco California

0.7

Correlation Coefficient

T Rowe  Pimco California

Poor diversification

The 3 months correlation between TBLCX and Pimco is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Pimco California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco California Mun and T Rowe 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 T Rowe Price are associated (or correlated) with Pimco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco California Mun has no effect on the direction of T Rowe i.e., T Rowe and Pimco California go up and down completely randomly.

Pair Corralation between T Rowe and Pimco California

Assuming the 90 days horizon T Rowe Price is expected to under-perform the Pimco California. But the mutual fund apears to be less risky and, when comparing its historical volatility, T Rowe Price is 1.14 times less risky than Pimco California. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Pimco California Municipal is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,050  in Pimco California Municipal on October 6, 2024 and sell it today you would lose (15.00) from holding Pimco California Municipal or give up 1.43% of portfolio value over 90 days.

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

T Rowe Price  vs.  Pimco California Municipal

T Rowe Price

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pimco California Mun

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with T Rowe and Pimco California

The main advantage of trading using opposite T Rowe and Pimco California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe position performs unexpectedly, Pimco California 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 California will offset losses from the drop in Pimco California's long position.

The idea behind T Rowe Price and Pimco California Municipal 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.