Correlation Between Pimco Income and Orinda Income

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

Diversification Opportunities for Pimco Income and Orinda Income

0.6

Correlation Coefficient

Pimco Income  Orinda Income

Poor diversification

The 3 months correlation between Pimco and Orinda is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Income Strategy and Orinda Income Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orinda Income Opport 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 Orinda Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orinda Income Opport has no effect on the direction of Pimco Income i.e., Pimco Income and Orinda Income go up and down completely randomly.

Pair Corralation between Pimco Income and Orinda Income

Considering the 90-day investment horizon Pimco Income Strategy is expected to generate 1.16 times more return on investment than Orinda Income. However, Pimco Income is 1.16 times more volatile than Orinda Income Opportunities. It trades about 0.12 of its potential returns per unit of risk. Orinda Income Opportunities is currently generating about 0.12 per unit of risk. If you would invest  635.00  in Pimco Income Strategy on September 14, 2024 and sell it today you would earn a total of  113.00  from holding Pimco Income Strategy or generate 17.8% return on investment over 90 days.

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

Pimco Income Strategy  vs.  Orinda Income Opportunities

Pimco Income Strategy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Income Strategy are ranked lower than 8 (%) 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.

Orinda Income Opport

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Orinda Income Opportunities are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Orinda 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 Pimco Income and Orinda Income

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

The idea behind Pimco Income Strategy and Orinda Income Opportunities 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.