Correlation Between Morningstar Municipal and Pimco Global

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

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

Diversification Opportunities for Morningstar Municipal and Pimco Global

0.57

Correlation Coefficient

Morningstar Municipal  Pimco Global

Very weak diversification

The 3 months correlation between Morningstar and Pimco is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Municipal Bond and Pimco Global Multi Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Global Multi and Morningstar Municipal 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 Morningstar Municipal Bond are associated (or correlated) with Pimco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Global Multi has no effect on the direction of Morningstar Municipal i.e., Morningstar Municipal and Pimco Global go up and down completely randomly.

Pair Corralation between Morningstar Municipal and Pimco Global

Assuming the 90 days horizon Morningstar Municipal Bond is expected to under-perform the Pimco Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, Morningstar Municipal Bond is 2.59 times less risky than Pimco Global. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Pimco Global Multi Asset is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,436  in Pimco Global Multi Asset on December 31, 2024 and sell it today you would earn a total of  41.00  from holding Pimco Global Multi Asset or generate 2.86% return on investment over 90 days.

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

Morningstar Municipal Bond  vs.  Pimco Global Multi Asset

Morningstar Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morningstar Municipal Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Morningstar Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Global Multi

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Global Multi Asset are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morningstar Municipal and Pimco Global

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

The idea behind Morningstar Municipal Bond and Pimco Global Multi 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.