Correlation Between Russell 2000 and Pimco Income

Can any of the company-specific risk be diversified away by investing in both Russell 2000 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 Russell 2000 and Pimco Income into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Russell 2000 2x and Pimco Income Strategy, you can compare the effects of market volatilities on Russell 2000 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 Russell 2000 with a short position of Pimco Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell 2000 and Pimco Income.

Diversification Opportunities for Russell 2000 and Pimco Income

-0.55

Correlation Coefficient

Russell 2000  Pimco Income

Excellent diversification

The 3 months correlation between Russell and Pimco is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Russell 2000 2x and Pimco Income Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income Strategy and Russell 2000 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 Russell 2000 2x 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 Strategy has no effect on the direction of Russell 2000 i.e., Russell 2000 and Pimco Income go up and down completely randomly.

Pair Corralation between Russell 2000 and Pimco Income

Assuming the 90 days horizon Russell 2000 2x is expected to under-perform the Pimco Income. In addition to that, Russell 2000 is 8.72 times more volatile than Pimco Income Strategy. It trades about -0.13 of its total potential returns per unit of risk. Pimco Income Strategy is currently generating about 0.25 per unit of volatility. If you would invest  722.00  in Pimco Income Strategy on December 28, 2024 and sell it today you would earn a total of  31.00  from holding Pimco Income Strategy or generate 4.29% return on investment over 90 days.

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

Russell 2000 2x  vs.  Pimco Income Strategy

Russell 2000 2x

Risk-Adjusted Performance

Very Weak

Over the last 90 days Russell 2000 2x has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pimco Income Strategy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Income Strategy are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy technical and fundamental indicators, Pimco Income is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Russell 2000 and Pimco Income

The main advantage of trading using opposite Russell 2000 and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell 2000 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 Russell 2000 2x and Pimco Income Strategy 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..