Correlation Between Prudential Core and Pimco Income
Can any of the company-specific risk be diversified away by investing in both Prudential Core 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 Prudential Core and Pimco Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Core Conservative and Pimco Income Fund, you can compare the effects of market volatilities on Prudential Core 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 Prudential Core with a short position of Pimco Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Core and Pimco Income.
Diversification Opportunities for Prudential Core and Pimco Income
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prudential and Pimco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Core Conservative and Pimco Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income and Prudential Core 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 Prudential Core Conservative 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 Prudential Core i.e., Prudential Core and Pimco Income go up and down completely randomly.
Pair Corralation between Prudential Core and Pimco Income
Assuming the 90 days horizon Prudential Core is expected to generate 1.63 times less return on investment than Pimco Income. In addition to that, Prudential Core is 1.35 times more volatile than Pimco Income Fund. It trades about 0.04 of its total potential returns per unit of risk. Pimco Income Fund is currently generating about 0.09 per unit of volatility. If you would invest 931.00 in Pimco Income Fund on September 14, 2024 and sell it today you would earn a total of 132.00 from holding Pimco Income Fund or generate 14.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Core Conservative vs. Pimco Income Fund
Performance |
| Timeline |
| Prudential Core Cons |
| Pimco Income |
Prudential Core and Pimco Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Core and Pimco Income
The main advantage of trading using opposite Prudential Core and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Core 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 Prudential Core Conservative 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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