Correlation Between Pimco Dynamic and Western Asset

Can any of the company-specific risk be diversified away by investing in both Pimco Dynamic and Western Asset 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 Western Asset 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 Western Asset Mortgage, you can compare the effects of market volatilities on Pimco Dynamic and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Dynamic and Western Asset.

Diversification Opportunities for Pimco Dynamic and Western Asset

0.13

Correlation Coefficient

Pimco Dynamic  Western Asset

Average diversification

The 3 months correlation between Pimco and Western is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Dynamic Income and Western Asset Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Mortgage 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Mortgage has no effect on the direction of Pimco Dynamic i.e., Pimco Dynamic and Western Asset go up and down completely randomly.

Pair Corralation between Pimco Dynamic and Western Asset

Considering the 90-day investment horizon Pimco Dynamic is expected to generate 1.57 times less return on investment than Western Asset. In addition to that, Pimco Dynamic is 1.33 times more volatile than Western Asset Mortgage. It trades about 0.05 of its total potential returns per unit of risk. Western Asset Mortgage is currently generating about 0.11 per unit of volatility. If you would invest  1,160  in Western Asset Mortgage on September 2, 2024 and sell it today you would earn a total of  37.00  from holding Western Asset Mortgage or generate 3.19% return on investment over 90 days.

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

Pimco Dynamic Income  vs.  Western Asset Mortgage

Pimco Dynamic Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Dynamic Income are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Pimco Dynamic is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Western Asset Mortgage

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Mortgage are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy primary indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pimco Dynamic and Western Asset

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

The idea behind Pimco Dynamic Income and Western Asset Mortgage 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.