Correlation Between Pimco New and Franklin High

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

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

Diversification Opportunities for Pimco New and Franklin High

0.97

Correlation Coefficient

Pimco New  Franklin High

Almost no diversification

The 3 months correlation between Pimco and Franklin is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Pimco New York and Franklin High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin High Yield and Pimco New 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 New York are associated (or correlated) with Franklin High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin High Yield has no effect on the direction of Pimco New i.e., Pimco New and Franklin High go up and down completely randomly.

Pair Corralation between Pimco New and Franklin High

Assuming the 90 days horizon Pimco New York is expected to under-perform the Franklin High. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pimco New York is 1.26 times less risky than Franklin High. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Franklin High Yield is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  908.00  in Franklin High Yield on September 13, 2024 and sell it today you would earn a total of  8.00  from holding Franklin High Yield or generate 0.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Pimco New York  vs.  Franklin High Yield

Pimco New York

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Pimco New York has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pimco New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin High Yield

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin High Yield are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin High 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 New and Franklin High

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

The idea behind Pimco New York and Franklin High Yield 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.