Correlation Between Short Duration and Pimco High
Can any of the company-specific risk be diversified away by investing in both Short Duration and Pimco High 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 Short Duration and Pimco High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Duration Municipal and Pimco High Yield, you can compare the effects of market volatilities on Short Duration and Pimco High 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 Short Duration with a short position of Pimco High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Duration and Pimco High.
Diversification Opportunities for Short Duration and Pimco High
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Short and Pimco is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Municipal and Pimco High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco High Yield and Short Duration 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 Short Duration Municipal are associated (or correlated) with Pimco High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco High Yield has no effect on the direction of Short Duration i.e., Short Duration and Pimco High go up and down completely randomly.
Pair Corralation between Short Duration and Pimco High
Assuming the 90 days horizon Short Duration is expected to generate 2.35 times less return on investment than Pimco High. But when comparing it to its historical volatility, Short Duration Municipal is 3.09 times less risky than Pimco High. It trades about 0.22 of its potential returns per unit of risk. Pimco High Yield is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 851.00 in Pimco High Yield on August 30, 2024 and sell it today you would earn a total of 12.00 from holding Pimco High Yield or generate 1.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Duration Municipal vs. Pimco High Yield
Performance |
| Timeline |
| Short Duration Municipal |
| Pimco High Yield |
Short Duration and Pimco High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short Duration and Pimco High
The main advantage of trading using opposite Short Duration and Pimco High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Duration position performs unexpectedly, Pimco High 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 High will offset losses from the drop in Pimco High's long position.| Short Duration vs. Pimco Rae Worldwide | Short Duration vs. Pimco Rae Worldwide | Short Duration vs. Pimco Rae Worldwide | Short Duration vs. Pimco Rae Worldwide |
| Pimco High vs. Pimco Rae Worldwide | Pimco High vs. Pimco Rae Worldwide | Pimco High vs. Pimco Rae Worldwide | Pimco High vs. Pimco Rae Worldwide |
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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