Correlation Between Pimco Dynamic and Equity Income

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

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

Diversification Opportunities for Pimco Dynamic and Equity Income

0.33

Correlation Coefficient

Pimco Dynamic  Equity Income

Weak diversification

The 3 months correlation between Pimco and Equity is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Dynamic Income and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income and Pimco Dynamic 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 Pimco Dynamic Income are associated (or correlated) with Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of Pimco Dynamic i.e., Pimco Dynamic and Equity Income go up and down completely randomly.

Pair Corralation between Pimco Dynamic and Equity Income

Considering the 90-day investment horizon Pimco Dynamic Income is expected to generate 0.6 times more return on investment than Equity Income. However, Pimco Dynamic Income is 1.66 times less risky than Equity Income. It trades about 0.64 of its potential returns per unit of risk. Equity Income Fund is currently generating about 0.08 per unit of risk. If you would invest  1,916  in Pimco Dynamic Income on December 5, 2024 and sell it today you would earn a total of  81.00  from holding Pimco Dynamic Income or generate 4.23% return on investment over 90 days.

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

Pimco Dynamic Income  vs.  Equity Income Fund

Pimco Dynamic Income

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Dynamic Income are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly unfluctuating fundamental indicators, Pimco Dynamic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Equity Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equity Income Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Pimco Dynamic and Equity Income

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

The idea behind Pimco Dynamic Income and Equity 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.