Correlation Between Pimco All and Absolute Capital

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Can any of the company-specific risk be diversified away by investing in both Pimco All and Absolute Capital 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 Absolute Capital 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 Absolute Capital Defender, you can compare the effects of market volatilities on Pimco All and Absolute Capital 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 Absolute Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco All and Absolute Capital.

Diversification Opportunities for Pimco All and Absolute Capital

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Pimco and Absolute is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Pimco All Asset and Absolute Capital Defender in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Defender 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 Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Defender has no effect on the direction of Pimco All i.e., Pimco All and Absolute Capital go up and down completely randomly.

Pair Corralation between Pimco All and Absolute Capital

Assuming the 90 days horizon Pimco All Asset is expected to generate 0.84 times more return on investment than Absolute Capital. However, Pimco All Asset is 1.19 times less risky than Absolute Capital. It trades about -0.12 of its potential returns per unit of risk. Absolute Capital Defender is currently generating about -0.13 per unit of risk. If you would invest  1,087  in Pimco All Asset on January 17, 2024 and sell it today you would lose (10.00) from holding Pimco All Asset or give up 0.92% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.24%
ValuesDaily Returns

Pimco All Asset  vs.  Absolute Capital Defender

 Performance 
       Timeline  
Pimco All Asset 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
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.
Absolute Capital Defender 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Capital Defender are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Absolute Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco All and Absolute Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pimco All and Absolute Capital

The main advantage of trading using opposite Pimco All and Absolute Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pimco All position performs unexpectedly, Absolute Capital 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 Absolute Capital will offset losses from the drop in Absolute Capital's long position.
The idea behind Pimco All Asset and Absolute Capital Defender 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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