Correlation Between Ishares Municipal and Pimco Income
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal 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 Ishares Municipal and Pimco Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ishares Municipal Bond and Pimco Income Fund, you can compare the effects of market volatilities on Ishares Municipal 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 Ishares Municipal with a short position of Pimco Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Pimco Income.
Diversification Opportunities for Ishares Municipal and Pimco Income
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ishares and Pimco is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Pimco Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income and Ishares Municipal 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 Ishares Municipal Bond 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 Ishares Municipal i.e., Ishares Municipal and Pimco Income go up and down completely randomly.
Pair Corralation between Ishares Municipal and Pimco Income
Assuming the 90 days horizon Ishares Municipal is expected to generate 1.2 times less return on investment than Pimco Income. But when comparing it to its historical volatility, Ishares Municipal Bond is 1.03 times less risky than Pimco Income. It trades about 0.12 of its potential returns per unit of risk. Pimco Income Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,017 in Pimco Income Fund on August 25, 2024 and sell it today you would earn a total of 40.00 from holding Pimco Income Fund or generate 3.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Pimco Income Fund
Performance |
| Timeline |
| Ishares Municipal Bond |
| Pimco Income |
Ishares Municipal and Pimco Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Pimco Income
The main advantage of trading using opposite Ishares Municipal and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal 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.| Ishares Municipal vs. Balanced Fund Retail | Ishares Municipal vs. Cutler Equity | Ishares Municipal vs. Vanguard Telecommunication Services | Ishares Municipal vs. Rbc Global Equity |
| Pimco Income vs. Multisector Bond Sma | Pimco Income vs. Dws Government Money | Pimco Income vs. Morningstar Defensive Bond | Pimco Income vs. Ishares Municipal Bond |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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