Correlation Between Zacks Small-cap and Pimco Small

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

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

Diversification Opportunities for Zacks Small-cap and Pimco Small

0.53

Correlation Coefficient

Zacks Small-cap  Pimco Small

Very weak diversification

The 3 months correlation between Zacks and Pimco is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Zacks Small Cap E and Pimco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Small Cap and Zacks Small-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 Zacks Small Cap E are associated (or correlated) with Pimco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Small Cap has no effect on the direction of Zacks Small-cap i.e., Zacks Small-cap and Pimco Small go up and down completely randomly.

Pair Corralation between Zacks Small-cap and Pimco Small

Assuming the 90 days horizon Zacks Small Cap E is expected to under-perform the Pimco Small. In addition to that, Zacks Small-cap is 1.18 times more volatile than Pimco Small Cap. It trades about -0.01 of its total potential returns per unit of risk. Pimco Small Cap is currently generating about 0.06 per unit of volatility. If you would invest  654.00  in Pimco Small Cap on October 5, 2024 and sell it today you would earn a total of  137.00  from holding Pimco Small Cap or generate 20.95% return on investment over 90 days.

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

Zacks Small Cap E  vs.  Pimco Small Cap

Zacks Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zacks Small Cap E has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pimco Small Cap

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Zacks Small-cap and Pimco Small

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

The idea behind Zacks Small Cap E and Pimco Small Cap 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.