Correlation Between Government Securities and Pimco Preferred

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

By analyzing existing cross correlation between Government Securities Fund and Pimco Preferred And, you can compare the effects of market volatilities on Government Securities and Pimco Preferred 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 Government Securities with a short position of Pimco Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Securities and Pimco Preferred.

Diversification Opportunities for Government Securities and Pimco Preferred

-0.23

Correlation Coefficient

Government Securities  Pimco Preferred

Very good diversification

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

Pair Corralation between Government Securities and Pimco Preferred

Assuming the 90 days horizon Government Securities Fund is expected to under-perform the Pimco Preferred. In addition to that, Government Securities is 1.82 times more volatile than Pimco Preferred And. It trades about -0.06 of its total potential returns per unit of risk. Pimco Preferred And is currently generating about 0.17 per unit of volatility. If you would invest  918.00  in Pimco Preferred And on August 31, 2024 and sell it today you would earn a total of  13.00  from holding Pimco Preferred And or generate 1.42% return on investment over 90 days.

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

Government Securities Fund  vs.  Pimco Preferred And

Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pimco Preferred And

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Preferred And are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Pimco Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Government Securities and Pimco Preferred

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

The idea behind Government Securities Fund and Pimco Preferred And 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 Valuation module to check real value of public entities based on technical and fundamental data.