Correlation Between Franklin Strategic and Pimco Income
Can any of the company-specific risk be diversified away by investing in both Franklin Strategic 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 Franklin Strategic and Pimco Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Strategic Income and Pimco Income Fund, you can compare the effects of market volatilities on Franklin Strategic 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 Franklin Strategic with a short position of Pimco Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Strategic and Pimco Income.
Diversification Opportunities for Franklin Strategic and Pimco Income
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and Pimco is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Strategic Income and Pimco Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income and Franklin Strategic 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 Strategic Income 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 Franklin Strategic i.e., Franklin Strategic and Pimco Income go up and down completely randomly.
Pair Corralation between Franklin Strategic and Pimco Income
Assuming the 90 days horizon Franklin Strategic Income is expected to under-perform the Pimco Income. In addition to that, Franklin Strategic is 1.17 times more volatile than Pimco Income Fund. It trades about -0.03 of its total potential returns per unit of risk. Pimco Income Fund is currently generating about -0.01 per unit of volatility. If you would invest 1,069 in Pimco Income Fund on September 12, 2024 and sell it today you would lose (1.00) from holding Pimco Income Fund or give up 0.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Strategic Income vs. Pimco Income Fund
Performance |
| Timeline |
| Franklin Strategic Income |
| Pimco Income |
Franklin Strategic and Pimco Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Strategic and Pimco Income
The main advantage of trading using opposite Franklin Strategic and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Strategic 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 Franklin Strategic Income 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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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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