Correlation Between Investment Grade and Pimco Income

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

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

Diversification Opportunities for Investment Grade and Pimco Income

0.93

Correlation Coefficient

Investment Grade  Pimco Income

Almost no diversification

The 3 months correlation between Investment and PIMCO is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Investment Grade Porate and Pimco Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income and Investment Grade 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 Investment Grade Porate 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 has no effect on the direction of Investment Grade i.e., Investment Grade and Pimco Income go up and down completely randomly.

Pair Corralation between Investment Grade and Pimco Income

Assuming the 90 days horizon Investment Grade Porate is expected to generate 1.72 times more return on investment than Pimco Income. However, Investment Grade is 1.72 times more volatile than Pimco Income Fund. It trades about 0.12 of its potential returns per unit of risk. Pimco Income Fund is currently generating about 0.19 per unit of risk. If you would invest  899.00  in Investment Grade Porate on September 1, 2024 and sell it today you would earn a total of  9.00  from holding Investment Grade Porate or generate 1.0% return on investment over 90 days.

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

Investment Grade Porate  vs.  Pimco Income Fund

Investment Grade Porate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pimco Income

Risk-Adjusted Performance

3 of 100

Insignificant

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

The main advantage of trading using opposite Investment Grade and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment Grade 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 Investment Grade Porate and Pimco Income Fund 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..