Correlation Between Franklin and Pimco Funds
Can any of the company-specific risk be diversified away by investing in both Franklin and Pimco Funds 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 Franklin and Pimco Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Government Money and Pimco Funds , you can compare the effects of market volatilities on Franklin and Pimco Funds 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 Franklin with a short position of Pimco Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and Pimco Funds.
Diversification Opportunities for Franklin and Pimco Funds
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Franklin and PIMCO is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Pimco Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Funds and Franklin 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 Franklin Government Money are associated (or correlated) with Pimco Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Funds has no effect on the direction of Franklin i.e., Franklin and Pimco Funds go up and down completely randomly.
Pair Corralation between Franklin and Pimco Funds
Assuming the 90 days horizon Franklin is expected to generate 2.1 times less return on investment than Pimco Funds. But when comparing it to its historical volatility, Franklin Government Money is 6.86 times less risky than Pimco Funds. It trades about 0.13 of its potential returns per unit of risk. Pimco Funds is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 89.00 in Pimco Funds on August 31, 2024 and sell it today you would earn a total of 11.00 from holding Pimco Funds or generate 12.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Franklin Government Money vs. Pimco Funds
Performance |
| Timeline |
| Franklin Government Money |
| Pimco Funds |
Franklin and Pimco Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin and Pimco Funds
The main advantage of trading using opposite Franklin and Pimco Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin position performs unexpectedly, Pimco Funds 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 Funds will offset losses from the drop in Pimco Funds' long position.| Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard 500 Index | Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard Total Stock |
| Pimco Funds vs. Vanguard Total Stock | Pimco Funds vs. Vanguard 500 Index | Pimco Funds vs. Vanguard Total Stock | Pimco Funds vs. Vanguard Total Stock |
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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