Correlation Between Old Westbury and Pimco Income

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

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

Diversification Opportunities for Old Westbury and Pimco Income

0.77

Correlation Coefficient

Old Westbury  Pimco Income

Poor diversification

The 3 months correlation between Old and Pimco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Old Westbury Municipal and Pimco Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income and Old Westbury 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 Old Westbury Municipal 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 Old Westbury i.e., Old Westbury and Pimco Income go up and down completely randomly.

Pair Corralation between Old Westbury and Pimco Income

Assuming the 90 days horizon Old Westbury Municipal is expected to under-perform the Pimco Income. But the mutual fund apears to be less risky and, when comparing its historical volatility, Old Westbury Municipal is 1.39 times less risky than Pimco Income. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Pimco Income Fund is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,038  in Pimco Income Fund on December 28, 2024 and sell it today you would earn a total of  28.00  from holding Pimco Income Fund or generate 2.7% return on investment over 90 days.

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

Old Westbury Municipal  vs.  Pimco Income Fund

Old Westbury Municipal

Risk-Adjusted Performance

Very Weak

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

Pimco Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Income Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Old Westbury and Pimco Income

The main advantage of trading using opposite Old Westbury and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Westbury 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 Old Westbury Municipal and Pimco Income Fund 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.