Correlation Between Legg Mason and Pimco Income
Can any of the company-specific risk be diversified away by investing in both Legg Mason 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 Legg Mason and Pimco Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Global and Pimco Income Fund, you can compare the effects of market volatilities on Legg Mason 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 Legg Mason with a short position of Pimco Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Pimco Income.
Diversification Opportunities for Legg Mason and Pimco Income
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Pimco is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Pimco Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income and Legg Mason 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 Legg Mason Global 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 Legg Mason i.e., Legg Mason and Pimco Income go up and down completely randomly.
Pair Corralation between Legg Mason and Pimco Income
Assuming the 90 days horizon Legg Mason is expected to generate 1.3 times less return on investment than Pimco Income. In addition to that, Legg Mason is 1.18 times more volatile than Pimco Income Fund. It trades about 0.02 of its total potential returns per unit of risk. Pimco Income Fund is currently generating about 0.03 per unit of volatility. If you would invest 1,064 in Pimco Income Fund on September 13, 2024 and sell it today you would earn a total of 3.00 from holding Pimco Income Fund or generate 0.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Global vs. Pimco Income Fund
Performance |
| Timeline |
| Legg Mason Global |
| Pimco Income |
Legg Mason and Pimco Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Pimco Income
The main advantage of trading using opposite Legg Mason and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason 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.| Legg Mason vs. Calamos Global Equity | Legg Mason vs. Gmo Global Equity | Legg Mason vs. Qs Global Equity | Legg Mason vs. Touchstone International Equity |
| Pimco Income vs. Upright Assets Allocation | Pimco Income vs. Morningstar Unconstrained Allocation | Pimco Income vs. Touchstone Large Cap | Pimco Income vs. Washington Mutual Investors |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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