Correlation Between Ab Select and Pimco Rae

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

By analyzing existing cross correlation between Ab Select Longshort and Pimco Rae Worldwide, you can compare the effects of market volatilities on Ab Select 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 Ab Select with a short position of Pimco Rae. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Select and Pimco Rae.

Diversification Opportunities for Ab Select and Pimco Rae

0.83

Correlation Coefficient

Ab Select  Pimco Rae

Very poor diversification

The 3 months correlation between ASCLX and Pimco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Ab Select Longshort and Pimco Rae Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Rae Worldwide and Ab Select 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 Ab Select Longshort 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 Worldwide has no effect on the direction of Ab Select i.e., Ab Select and Pimco Rae go up and down completely randomly.

Pair Corralation between Ab Select and Pimco Rae

Assuming the 90 days horizon Ab Select Longshort is expected to generate 0.9 times more return on investment than Pimco Rae. However, Ab Select Longshort is 1.12 times less risky than Pimco Rae. It trades about 0.06 of its potential returns per unit of risk. Pimco Rae Worldwide is currently generating about 0.04 per unit of risk. If you would invest  1,100  in Ab Select Longshort on February 13, 2024 and sell it today you would earn a total of  171.00  from holding Ab Select Longshort or generate 15.55% return on investment over 90 days.

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

Ab Select Longshort  vs.  Pimco Rae Worldwide

Ab Select Longshort

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Select Longshort are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Ab Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Rae Worldwide

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Ab Select and Pimco Rae

The main advantage of trading using opposite Ab Select and Pimco Rae positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Select 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.

The idea behind Ab Select Longshort and Pimco Rae Worldwide 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.