Correlation Between Pimco California and Munivest Fund

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

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

Diversification Opportunities for Pimco California and Munivest Fund

0.57

Correlation Coefficient

Pimco California  Munivest Fund

Very weak diversification

The 3 months correlation between Pimco and Munivest is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pimco California Municipal and Munivest Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Munivest Fund and Pimco California 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 California Municipal are associated (or correlated) with Munivest Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Munivest Fund has no effect on the direction of Pimco California i.e., Pimco California and Munivest Fund go up and down completely randomly.

Pair Corralation between Pimco California and Munivest Fund

Considering the 90-day investment horizon Pimco California Municipal is expected to under-perform the Munivest Fund. But the fund apears to be less risky and, when comparing its historical volatility, Pimco California Municipal is 1.19 times less risky than Munivest Fund. The fund trades about -0.06 of its potential returns per unit of risk. The Munivest Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  691.00  in Munivest Fund on December 28, 2024 and sell it today you would earn a total of  12.00  from holding Munivest Fund or generate 1.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Pimco California Municipal  vs.  Munivest Fund

Pimco California Mun

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco California Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound basic indicators, Pimco California is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Munivest Fund

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Munivest Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Munivest Fund is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pimco California and Munivest Fund

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

The idea behind Pimco California Municipal and Munivest 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.