Correlation Between New World and Pimco Rae
Can any of the company-specific risk be diversified away by investing in both New World and Pimco Rae 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 New World and Pimco Rae into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New World Fund and Pimco Rae Fundamental, you can compare the effects of market volatilities on New World and Pimco Rae 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 New World with a short position of Pimco Rae. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Pimco Rae.
Diversification Opportunities for New World and Pimco Rae
Very poor diversification
The 3 months correlation between New and Pimco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Pimco Rae Fundamental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Rae Fundamental and New World 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 New World Fund are associated (or correlated) with Pimco Rae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Rae Fundamental has no effect on the direction of New World i.e., New World and Pimco Rae go up and down completely randomly.
Pair Corralation between New World and Pimco Rae
Assuming the 90 days horizon New World Fund is expected to under-perform the Pimco Rae. In addition to that, New World is 1.08 times more volatile than Pimco Rae Fundamental. It trades about -0.1 of its total potential returns per unit of risk. Pimco Rae Fundamental is currently generating about 0.03 per unit of volatility. If you would invest 1,019 in Pimco Rae Fundamental on January 25, 2024 and sell it today you would earn a total of 4.00 from holding Pimco Rae Fundamental or generate 0.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Pimco Rae Fundamental
Performance |
| Timeline |
| New World Fund |
| Pimco Rae Fundamental |
New World and Pimco Rae Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Pimco Rae
The main advantage of trading using opposite New World and Pimco Rae positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Pimco Rae 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 Rae will offset losses from the drop in Pimco Rae's long position.| New World vs. Amana Income Fund | New World vs. Amana Growth Fund | New World vs. Amana Participation Fund | New World vs. HUMANA INC |
| Pimco Rae vs. Amana Income Fund | Pimco Rae vs. Amana Growth Fund | Pimco Rae vs. Amana Participation Fund | Pimco Rae vs. HUMANA INC |
Check out your portfolio center.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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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