Correlation Between Money Market and Pimco Income

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Can any of the company-specific risk be diversified away by investing in both Money Market and Pimco Income 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 Money Market and Pimco Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Money Market Obligations and Pimco Income Strategy, you can compare the effects of market volatilities on Money Market and Pimco Income 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 Money Market with a short position of Pimco Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Money Market and Pimco Income.

Diversification Opportunities for Money Market and Pimco Income

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Money and Pimco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Money Market Obligations and Pimco Income Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income Strategy and Money Market 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 Money Market Obligations are associated (or correlated) with Pimco Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Income Strategy has no effect on the direction of Money Market i.e., Money Market and Pimco Income go up and down completely randomly.

Pair Corralation between Money Market and Pimco Income

Assuming the 90 days horizon Money Market is expected to generate 2.61 times less return on investment than Pimco Income. But when comparing it to its historical volatility, Money Market Obligations is 3.17 times less risky than Pimco Income. It trades about 0.13 of its potential returns per unit of risk. Pimco Income Strategy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  729.00  in Pimco Income Strategy on September 14, 2024 and sell it today you would earn a total of  19.00  from holding Pimco Income Strategy or generate 2.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Money Market Obligations  vs.  Pimco Income Strategy

 Performance 
       Timeline  
Money Market Obligations 

Risk-Adjusted Performance

9 of 100

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

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Income Strategy are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy technical and fundamental indicators, Pimco Income is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Money Market and Pimco Income Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Money Market and Pimco Income

The main advantage of trading using opposite Money Market and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Money Market position performs unexpectedly, Pimco Income 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 Income will offset losses from the drop in Pimco Income's long position.
The idea behind Money Market Obligations and Pimco Income Strategy 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.

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