Correlation Between Pimco High and Royce Value

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

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

Diversification Opportunities for Pimco High and Royce Value

0.72

Correlation Coefficient

Pimco High  Royce Value

Poor diversification

The 3 months correlation between Pimco and Royce is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Pimco High Income and Royce Value Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Value Closed and Pimco High 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 Pimco High Income are associated (or correlated) with Royce Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Value Closed has no effect on the direction of Pimco High i.e., Pimco High and Royce Value go up and down completely randomly.

Pair Corralation between Pimco High and Royce Value

Considering the 90-day investment horizon Pimco High is expected to generate 1.75 times less return on investment than Royce Value. But when comparing it to its historical volatility, Pimco High Income is 1.04 times less risky than Royce Value. It trades about 0.2 of its potential returns per unit of risk. Royce Value Closed is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  1,409  in Royce Value Closed on February 15, 2024 and sell it today you would earn a total of  98.00  from holding Royce Value Closed or generate 6.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Pimco High Income  vs.  Royce Value Closed

Pimco High Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco High Income has generated negative risk-adjusted returns adding no value to fund investors. Despite quite persistent technical indicators, Pimco High is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Royce Value Closed

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Value Closed are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Royce Value is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pimco High and Royce Value

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

The idea behind Pimco High Income and Royce Value Closed 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 Global Correlations module to find global opportunities by holding instruments from different markets.