Correlation Between Low Duration and Pimco Income

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

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

Diversification Opportunities for Low Duration and Pimco Income

0.9

Correlation Coefficient

Low Duration  Pimco Income

Almost no diversification

The 3 months correlation between Low and Pimco is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Low Duration Fund and Pimco Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income and Low Duration 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 Low Duration Fund are associated (or correlated) with Pimco Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Income has no effect on the direction of Low Duration i.e., Low Duration and Pimco Income go up and down completely randomly.

Pair Corralation between Low Duration and Pimco Income

Assuming the 90 days horizon Low Duration is expected to generate 2.61 times less return on investment than Pimco Income. But when comparing it to its historical volatility, Low Duration Fund is 1.93 times less risky than Pimco Income. It trades about 0.02 of its potential returns per unit of risk. Pimco Income Fund is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,061  in Pimco Income Fund on August 31, 2024 and sell it today you would earn a total of  3.00  from holding Pimco Income Fund or generate 0.28% return on investment over 90 days.

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

Low Duration Fund  vs.  Pimco Income Fund

Low Duration

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Low Duration Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Low Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Income

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Income Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Low Duration and Pimco Income

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

The idea behind Low Duration Fund and Pimco Income 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.