Correlation Between Western Asset and Pimco Income

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

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

Diversification Opportunities for Western Asset and Pimco Income

0.61

Correlation Coefficient

Western Asset  Pimco Income

Poor diversification

The 3 months correlation between Western and Pimco is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High 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 Western Asset 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 Western Asset High 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 Western Asset i.e., Western Asset and Pimco Income go up and down completely randomly.

Pair Corralation between Western Asset and Pimco Income

Considering the 90-day investment horizon Western Asset is expected to generate 2.18 times less return on investment than Pimco Income. In addition to that, Western Asset is 1.52 times more volatile than Pimco Income Strategy. It trades about 0.06 of its total potential returns per unit of risk. Pimco Income Strategy is currently generating about 0.19 per unit of volatility. If you would invest  716.00  in Pimco Income Strategy on August 31, 2024 and sell it today you would earn a total of  34.00  from holding Pimco Income Strategy or generate 4.75% return on investment over 90 days.

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

Western Asset High  vs.  Pimco Income Strategy

Western Asset High

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy forward indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pimco Income Strategy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Income Strategy are ranked lower than 15 (%) 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.

Pair Trading with Western Asset and Pimco Income

The main advantage of trading using opposite Western Asset and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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 Western Asset High 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.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.