Correlation Between Pimco California and Pimco Municipal

Can any of the company-specific risk be diversified away by investing in both Pimco California and Pimco Municipal 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 Pimco Municipal 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 Pimco Municipal Income, you can compare the effects of market volatilities on Pimco California and Pimco Municipal 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 Pimco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco California and Pimco Municipal.

Diversification Opportunities for Pimco California and Pimco Municipal

0.69

Correlation Coefficient

Pimco California  Pimco Municipal

Poor diversification

The 3 months correlation between Pimco and Pimco is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Pimco California Municipal and Pimco Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Municipal Income 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 Pimco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Municipal Income has no effect on the direction of Pimco California i.e., Pimco California and Pimco Municipal go up and down completely randomly.

Pair Corralation between Pimco California and Pimco Municipal

Considering the 90-day investment horizon Pimco California Municipal is expected to under-perform the Pimco Municipal. But the fund apears to be less risky and, when comparing its historical volatility, Pimco California Municipal is 1.32 times less risky than Pimco Municipal. The fund trades about -0.09 of its potential returns per unit of risk. The Pimco Municipal Income is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  775.00  in Pimco Municipal Income on September 2, 2024 and sell it today you would earn a total of  18.00  from holding Pimco Municipal Income or generate 2.32% return on investment over 90 days.

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

Pimco California Municipal  vs.  Pimco Municipal Income

Pimco California Mun

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco California Municipal are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively invariable fundamental indicators, Pimco California is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pimco Municipal Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Pimco California and Pimco Municipal

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

The idea behind Pimco California Municipal and Pimco Municipal Income 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.