Correlation Between Nasdaq-100 Fund and Pimco Income

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Fund 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 Nasdaq-100 Fund and Pimco Income into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq 100 Fund Class and Pimco Income Fund, you can compare the effects of market volatilities on Nasdaq-100 Fund 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 Nasdaq-100 Fund with a short position of Pimco Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Fund and Pimco Income.

Diversification Opportunities for Nasdaq-100 Fund and Pimco Income

0.1

Correlation Coefficient

Nasdaq-100 Fund  Pimco Income

Average diversification

The 3 months correlation between Nasdaq-100 and PIMCO is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Fund Class and Pimco Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income and Nasdaq-100 Fund 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 Nasdaq 100 Fund Class 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 Nasdaq-100 Fund i.e., Nasdaq-100 Fund and Pimco Income go up and down completely randomly.

Pair Corralation between Nasdaq-100 Fund and Pimco Income

Assuming the 90 days horizon Nasdaq 100 Fund Class is expected to under-perform the Pimco Income. In addition to that, Nasdaq-100 Fund is 6.8 times more volatile than Pimco Income Fund. It trades about -0.09 of its total potential returns per unit of risk. Pimco Income Fund is currently generating about 0.11 per unit of volatility. If you would invest  1,056  in Pimco Income Fund on December 2, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nasdaq 100 Fund Class  vs.  Pimco Income Fund

Nasdaq 100 Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

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 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 Nasdaq-100 Fund and Pimco Income

The main advantage of trading using opposite Nasdaq-100 Fund and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Fund 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 Nasdaq 100 Fund Class 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.