Correlation Between Pimco Income and Prudential Total

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

By analyzing existing cross correlation between Pimco Income Fund and Prudential Total Return, you can compare the effects of market volatilities on Pimco Income and Prudential Total 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 Prudential Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Income and Prudential Total.

Diversification Opportunities for Pimco Income and Prudential Total

0.86

Correlation Coefficient

Pimco Income  Prudential Total

Very poor diversification

The 3 months correlation between Pimco and Prudential is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Income Fund and Prudential Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Total Return 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 Fund are associated (or correlated) with Prudential Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Total Return has no effect on the direction of Pimco Income i.e., Pimco Income and Prudential Total go up and down completely randomly.

Pair Corralation between Pimco Income and Prudential Total

Assuming the 90 days horizon Pimco Income Fund is expected to generate 0.77 times more return on investment than Prudential Total. However, Pimco Income Fund is 1.29 times less risky than Prudential Total. It trades about 0.11 of its potential returns per unit of risk. Prudential Total Return is currently generating about 0.05 per unit of risk. If you would invest  1,056  in Pimco Income Fund on December 1, 2024 and sell it today you would earn a total of  17.00  from holding Pimco Income Fund or generate 1.61% return on investment over 90 days.

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

Pimco Income Fund  vs.  Prudential Total Return

Pimco Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Income Fund 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 Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Total Return

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Total Return are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Total 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 Income and Prudential Total

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

The idea behind Pimco Income Fund and Prudential Total Return 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.