Correlation Between Pimco Low and High Yield

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

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

Diversification Opportunities for Pimco Low and High Yield

0.87

Correlation Coefficient

Pimco Low  High Yield

Very poor diversification

The 3 months correlation between Pimco and High is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Low Duration and High Yield Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Fund and Pimco Low 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 Low Duration are associated (or correlated) with High Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Fund has no effect on the direction of Pimco Low i.e., Pimco Low and High Yield go up and down completely randomly.

Pair Corralation between Pimco Low and High Yield

Assuming the 90 days horizon Pimco Low is expected to generate 1.25 times less return on investment than High Yield. But when comparing it to its historical volatility, Pimco Low Duration is 1.61 times less risky than High Yield. It trades about 0.15 of its potential returns per unit of risk. High Yield Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  679.00  in High Yield Fund on September 10, 2024 and sell it today you would earn a total of  133.00  from holding High Yield Fund or generate 19.59% return on investment over 90 days.

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

Pimco Low Duration  vs.  High Yield Fund

Pimco Low Duration

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Low Duration are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pimco Low is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

High Yield Fund

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, High Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pimco Low and High Yield

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

The idea behind Pimco Low Duration and High Yield 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.