Correlation Between Munivest Fund and Pimco California

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

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

Diversification Opportunities for Munivest Fund and Pimco California

0.68

Correlation Coefficient

Munivest Fund  Pimco California

Poor diversification

The 3 months correlation between Munivest and Pimco is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Munivest Fund and Pimco California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco California Mun and Munivest Fund 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 Munivest Fund are associated (or correlated) with Pimco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco California Mun has no effect on the direction of Munivest Fund i.e., Munivest Fund and Pimco California go up and down completely randomly.

Pair Corralation between Munivest Fund and Pimco California

Considering the 90-day investment horizon Munivest Fund is expected to generate 0.91 times more return on investment than Pimco California. However, Munivest Fund is 1.09 times less risky than Pimco California. It trades about -0.03 of its potential returns per unit of risk. Pimco California Municipal is currently generating about -0.06 per unit of risk. If you would invest  738.00  in Munivest Fund on November 29, 2024 and sell it today you would lose (11.00) from holding Munivest Fund or give up 1.49% of portfolio value over 90 days.

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

Munivest Fund  vs.  Pimco California Municipal

Munivest Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Munivest Fund has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable basic indicators, Munivest Fund is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pimco California Mun

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco California Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound basic indicators, Pimco California is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Munivest Fund and Pimco California

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

The idea behind Munivest Fund and Pimco California Municipal 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.