Correlation Between Pimco Mortgage and Franklin Mutual

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

By analyzing existing cross correlation between Pimco Mortgage Opportunities and Franklin Mutual Global, you can compare the effects of market volatilities on Pimco Mortgage and Franklin Mutual 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 Mortgage with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Mortgage and Franklin Mutual.

Diversification Opportunities for Pimco Mortgage and Franklin Mutual

0.39

Correlation Coefficient

Pimco Mortgage  Franklin Mutual

Weak diversification

The 3 months correlation between Pimco and Franklin is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Mortgage Opportunities and Franklin Mutual Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Global and Pimco Mortgage 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 Mortgage Opportunities are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Global has no effect on the direction of Pimco Mortgage i.e., Pimco Mortgage and Franklin Mutual go up and down completely randomly.

Pair Corralation between Pimco Mortgage and Franklin Mutual

Assuming the 90 days horizon Pimco Mortgage Opportunities is expected to under-perform the Franklin Mutual. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pimco Mortgage Opportunities is 3.03 times less risky than Franklin Mutual. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Franklin Mutual Global is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,181  in Franklin Mutual Global on September 14, 2024 and sell it today you would lose (25.00) from holding Franklin Mutual Global or give up 0.79% of portfolio value over 90 days.

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

Pimco Mortgage Opportunities  vs.  Franklin Mutual Global

Pimco Mortgage Oppor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Franklin Mutual Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Mutual Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Franklin Mutual 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 Mortgage and Franklin Mutual

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

The idea behind Pimco Mortgage Opportunities and Franklin Mutual Global 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.