Correlation Between Metropolitan West and Pimco Income
Can any of the company-specific risk be diversified away by investing in both Metropolitan West 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 Metropolitan West and Pimco Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan West High and Pimco Income Fund, you can compare the effects of market volatilities on Metropolitan West 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 Metropolitan West with a short position of Pimco Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Pimco Income.
Diversification Opportunities for Metropolitan West and Pimco Income
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Metropolitan and Pimco is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West High and Pimco Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income and Metropolitan West 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 Metropolitan West 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 has no effect on the direction of Metropolitan West i.e., Metropolitan West and Pimco Income go up and down completely randomly.
Pair Corralation between Metropolitan West and Pimco Income
Assuming the 90 days horizon Metropolitan West is expected to generate 1.54 times less return on investment than Pimco Income. But when comparing it to its historical volatility, Metropolitan West High is 1.3 times less risky than Pimco Income. It trades about 0.11 of its potential returns per unit of risk. Pimco Income Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,044 in Pimco Income Fund on November 19, 2024 and sell it today you would earn a total of 21.00 from holding Pimco Income Fund or generate 2.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Metropolitan West High vs. Pimco Income Fund
Performance |
Timeline |
Metropolitan West High |
Pimco Income |
Metropolitan West and Pimco Income Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Metropolitan West and Pimco Income
The main advantage of trading using opposite Metropolitan West and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West 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.Metropolitan West vs. Federated Total Return | ||
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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