Correlation Between Municipal Bond and Pimco Long

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

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

Diversification Opportunities for Municipal Bond and Pimco Long

0.7

Correlation Coefficient

Municipal Bond  Pimco Long

Poor diversification

The 3 months correlation between Municipal and Pimco is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Fund and Pimco Long Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Long Duration and Municipal Bond 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 Municipal Bond Fund are associated (or correlated) with Pimco Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Long Duration has no effect on the direction of Municipal Bond i.e., Municipal Bond and Pimco Long go up and down completely randomly.

Pair Corralation between Municipal Bond and Pimco Long

Assuming the 90 days horizon Municipal Bond Fund is expected to generate 0.38 times more return on investment than Pimco Long. However, Municipal Bond Fund is 2.66 times less risky than Pimco Long. It trades about 0.07 of its potential returns per unit of risk. Pimco Long Duration is currently generating about -0.03 per unit of risk. If you would invest  947.00  in Municipal Bond Fund on September 3, 2024 and sell it today you would earn a total of  10.00  from holding Municipal Bond Fund or generate 1.06% return on investment over 90 days.

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

Municipal Bond Fund  vs.  Pimco Long Duration

Municipal Bond

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Municipal Bond Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Municipal Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Long Duration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Municipal Bond and Pimco Long

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

The idea behind Municipal Bond Fund and Pimco Long Duration 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.