Correlation Between Pimco Capital and Foreign Bond

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

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

Diversification Opportunities for Pimco Capital and Foreign Bond

0.94

Correlation Coefficient

Pimco Capital  Foreign Bond

Almost no diversification

The 3 months correlation between Pimco and Foreign is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Capital Sec and Foreign Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Bond and Pimco Capital 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 Capital Sec are associated (or correlated) with Foreign Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Bond has no effect on the direction of Pimco Capital i.e., Pimco Capital and Foreign Bond go up and down completely randomly.

Pair Corralation between Pimco Capital and Foreign Bond

Assuming the 90 days horizon Pimco Capital is expected to generate 1.47 times less return on investment than Foreign Bond. But when comparing it to its historical volatility, Pimco Capital Sec is 2.72 times less risky than Foreign Bond. It trades about 0.53 of its potential returns per unit of risk. Foreign Bond Fund is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  731.00  in Foreign Bond Fund on June 22, 2024 and sell it today you would earn a total of  52.00  from holding Foreign Bond Fund or generate 7.11% return on investment over 90 days.

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

Pimco Capital Sec  vs.  Foreign Bond Fund

Pimco Capital Sec

Risk-Adjusted Performance

41 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Capital Sec are ranked lower than 41 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Foreign Bond

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Foreign Bond Fund are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Foreign Bond may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with Pimco Capital and Foreign Bond

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

The idea behind Pimco Capital Sec and Foreign Bond Fund 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.