Correlation Between Pimco High and BlackRock Credit

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

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

Diversification Opportunities for Pimco High and BlackRock Credit

0.83

Correlation Coefficient

Pimco High  BlackRock Credit

Very poor diversification

The 3 months correlation between Pimco and BlackRock is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Pimco High Income and BlackRock Credit Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Credit All and Pimco High 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 High Income are associated (or correlated) with BlackRock Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Credit All has no effect on the direction of Pimco High i.e., Pimco High and BlackRock Credit go up and down completely randomly.

Pair Corralation between Pimco High and BlackRock Credit

Considering the 90-day investment horizon Pimco High is expected to generate 5.45 times less return on investment than BlackRock Credit. But when comparing it to its historical volatility, Pimco High Income is 1.57 times less risky than BlackRock Credit. It trades about 0.08 of its potential returns per unit of risk. BlackRock Credit Allocation is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,060  in BlackRock Credit Allocation on November 29, 2024 and sell it today you would earn a total of  24.00  from holding BlackRock Credit Allocation or generate 2.26% return on investment over 90 days.

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

Pimco High Income  vs.  BlackRock Credit Allocation

Pimco High Income

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco High Income are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent technical indicators, Pimco High is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

BlackRock Credit All

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Credit Allocation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, BlackRock Credit 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 High and BlackRock Credit

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

The idea behind Pimco High Income and BlackRock Credit Allocation 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 Global Correlations module to find global opportunities by holding instruments from different markets.