Correlation Between Us Small and Pimco Small

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

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

Diversification Opportunities for Us Small and Pimco Small

0.96

Correlation Coefficient

Us Small  Pimco Small

Almost no diversification

The 3 months correlation between DFSTX and Pimco is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Us Small Cap 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 Us Small 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 Us Small Cap 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 Us Small i.e., Us Small and Pimco Small go up and down completely randomly.

Pair Corralation between Us Small and Pimco Small

Assuming the 90 days horizon Us Small Cap is expected to generate 0.86 times more return on investment than Pimco Small. However, Us Small Cap is 1.17 times less risky than Pimco Small. It trades about -0.15 of its potential returns per unit of risk. Pimco Small Cap is currently generating about -0.18 per unit of risk. If you would invest  4,535  in Us Small Cap on February 2, 2024 and sell it today you would lose (147.00) from holding Us Small Cap or give up 3.24% of portfolio value over 90 days.

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

Us Small Cap  vs.  Pimco Small Cap

Us Small Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Us Small Cap are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Us Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Small Cap

Risk-Adjusted Performance

1 of 100

Very 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 fundamental 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 Us Small and Pimco Small

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

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.