Correlation Between Pimco Income and Sextant Growth

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

Diversification Opportunities for Pimco Income and Sextant Growth

-0.13

Correlation Coefficient

Pimco Income  Sextant Growth

Good diversification

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

Pair Corralation between Pimco Income and Sextant Growth

Considering the 90-day investment horizon Pimco Income Strategy is expected to generate 0.23 times more return on investment than Sextant Growth. However, Pimco Income Strategy is 4.32 times less risky than Sextant Growth. It trades about 0.26 of its potential returns per unit of risk. Sextant Growth Fund is currently generating about -0.1 per unit of risk. If you would invest  722.00  in Pimco Income Strategy on December 28, 2024 and sell it today you would earn a total of  32.00  from holding Pimco Income Strategy or generate 4.43% return on investment over 90 days.

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

Pimco Income Strategy  vs.  Sextant Growth Fund

Pimco Income Strategy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Income Strategy are ranked lower than 20 (%) 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.

Sextant Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sextant Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental 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 Income and Sextant Growth

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

The idea behind Pimco Income Strategy and Sextant 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.