Correlation Between Pimco Incme and Ab Small

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

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

Diversification Opportunities for Pimco Incme and Ab Small

-0.26

Correlation Coefficient

Pimco Incme  Ab Small

Very good diversification

The 3 months correlation between Pimco and QUAYX is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Incme Fund and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap and Pimco Incme 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 Incme Fund are associated (or correlated) with Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Pimco Incme i.e., Pimco Incme and Ab Small go up and down completely randomly.

Pair Corralation between Pimco Incme and Ab Small

Assuming the 90 days horizon Pimco Incme is expected to generate 4.71 times less return on investment than Ab Small. But when comparing it to its historical volatility, Pimco Incme Fund is 5.28 times less risky than Ab Small. It trades about 0.11 of its potential returns per unit of risk. Ab Small Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,174  in Ab Small Cap on September 1, 2024 and sell it today you would earn a total of  1,779  from holding Ab Small Cap or generate 28.81% return on investment over 90 days.

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

Pimco Incme Fund  vs.  Ab Small Cap

Pimco Incme Fund

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Incme Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Incme is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Small Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ab Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pimco Incme and Ab Small

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

The idea behind Pimco Incme Fund and Ab 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.