Correlation Between Pimco Income and Equity Growth

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

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

Diversification Opportunities for Pimco Income and Equity Growth

0.71

Correlation Coefficient

Pimco Income  Equity Growth

Poor diversification

The 3 months correlation between Pimco and Equity is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Income Strategy and Equity Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth and Pimco Income 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 Income Strategy are associated (or correlated) with Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth has no effect on the direction of Pimco Income i.e., Pimco Income and Equity Growth go up and down completely randomly.

Pair Corralation between Pimco Income and Equity Growth

Considering the 90-day investment horizon Pimco Income is expected to generate 2.02 times less return on investment than Equity Growth. But when comparing it to its historical volatility, Pimco Income Strategy is 1.85 times less risky than Equity Growth. It trades about 0.2 of its potential returns per unit of risk. Equity Growth Fund is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,131  in Equity Growth Fund on September 2, 2024 and sell it today you would earn a total of  324.00  from holding Equity Growth Fund or generate 10.35% return on investment over 90 days.

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

Pimco Income Strategy  vs.  Equity Growth Fund

Pimco Income Strategy

Risk-Adjusted Performance

15 of 100

Good

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

Equity Growth

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Growth Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Equity Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pimco Income and Equity Growth

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

The idea behind Pimco Income Strategy and Equity Growth 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.