Correlation Between Stone Harbor and Pimco Emerging
Can any of the company-specific risk be diversified away by investing in both Stone Harbor and Pimco Emerging 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 Stone Harbor and Pimco Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stone Harbor Local and Pimco Emerging Local, you can compare the effects of market volatilities on Stone Harbor and Pimco Emerging 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 Stone Harbor with a short position of Pimco Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Harbor and Pimco Emerging.
Diversification Opportunities for Stone Harbor and Pimco Emerging
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Stone and Pimco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Stone Harbor Local and Pimco Emerging Local in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Emerging Local and Stone Harbor 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 Stone Harbor Local are associated (or correlated) with Pimco Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Emerging Local has no effect on the direction of Stone Harbor i.e., Stone Harbor and Pimco Emerging go up and down completely randomly.
Pair Corralation between Stone Harbor and Pimco Emerging
Assuming the 90 days horizon Stone Harbor Local is expected to under-perform the Pimco Emerging. In addition to that, Stone Harbor is 1.13 times more volatile than Pimco Emerging Local. It trades about -0.23 of its total potential returns per unit of risk. Pimco Emerging Local is currently generating about -0.21 per unit of volatility. If you would invest 585.00 in Pimco Emerging Local on January 26, 2024 and sell it today you would lose (12.00) from holding Pimco Emerging Local or give up 2.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stone Harbor Local vs. Pimco Emerging Local
Performance |
| Timeline |
| Stone Harbor Local |
| Pimco Emerging Local |
Stone Harbor and Pimco Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stone Harbor and Pimco Emerging
The main advantage of trading using opposite Stone Harbor and Pimco Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Harbor position performs unexpectedly, Pimco Emerging 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 Emerging will offset losses from the drop in Pimco Emerging's long position.The idea behind Stone Harbor Local and Pimco Emerging Local 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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