Correlation Between Pimco All and Horizon Active

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

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

Diversification Opportunities for Pimco All and Horizon Active

0.9

Correlation Coefficient

Pimco All  Horizon Active

Almost no diversification

The 3 months correlation between Pimco and Horizon is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Pimco All Asset and Horizon Active Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Active Asset and Pimco All 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 All Asset are associated (or correlated) with Horizon Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Active Asset has no effect on the direction of Pimco All i.e., Pimco All and Horizon Active go up and down completely randomly.

Pair Corralation between Pimco All and Horizon Active

Assuming the 90 days horizon Pimco All is expected to generate 3.71 times less return on investment than Horizon Active. But when comparing it to its historical volatility, Pimco All Asset is 1.87 times less risky than Horizon Active. It trades about 0.04 of its potential returns per unit of risk. Horizon Active Asset is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,401  in Horizon Active Asset on January 24, 2024 and sell it today you would earn a total of  49.00  from holding Horizon Active Asset or generate 3.5% return on investment over 90 days.

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

Pimco All Asset  vs.  Horizon Active Asset

Pimco All Asset

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco All Asset 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 All is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Horizon Active Asset

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Active Asset are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Horizon Active is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pimco All and Horizon Active

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

The idea behind Pimco All Asset and Horizon Active Asset 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.