Correlation Between Pimco Income and Highland Merger

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

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

Diversification Opportunities for Pimco Income and Highland Merger

0.63

Correlation Coefficient

Pimco Income  Highland Merger

Poor diversification

The 3 months correlation between Pimco and Highland is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Income Strategy and Highland Merger Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Merger Arbitrage and Pimco Income 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 Income Strategy are associated (or correlated) with Highland Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Merger Arbitrage has no effect on the direction of Pimco Income i.e., Pimco Income and Highland Merger go up and down completely randomly.

Pair Corralation between Pimco Income and Highland Merger

Considering the 90-day investment horizon Pimco Income Strategy is expected to generate 2.11 times more return on investment than Highland Merger. However, Pimco Income is 2.11 times more volatile than Highland Merger Arbitrage. It trades about 0.14 of its potential returns per unit of risk. Highland Merger Arbitrage is currently generating about 0.06 per unit of risk. If you would invest  722.00  in Pimco Income Strategy on September 15, 2024 and sell it today you would earn a total of  25.00  from holding Pimco Income Strategy or generate 3.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Pimco Income Strategy  vs.  Highland Merger Arbitrage

Pimco Income Strategy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Income Strategy are ranked lower than 11 (%) 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 latest stock price disarray, may contribute to short-term losses for the investors.

Highland Merger Arbitrage

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highland Merger Arbitrage are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Highland Merger is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pimco Income and Highland Merger

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

The idea behind Pimco Income Strategy and Highland Merger Arbitrage 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..