Correlation Between California Bond and Pimco Income
Can any of the company-specific risk be diversified away by investing in both California Bond 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 California Bond and Pimco Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Bond Fund and Pimco Income Fund, you can compare the effects of market volatilities on California Bond 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 California Bond with a short position of Pimco Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Pimco Income.
Diversification Opportunities for California Bond and Pimco Income
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between California and Pimco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Pimco Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income and California Bond 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 California Bond Fund 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 California Bond i.e., California Bond and Pimco Income go up and down completely randomly.
Pair Corralation between California Bond and Pimco Income
Assuming the 90 days horizon California Bond is expected to generate 1.09 times less return on investment than Pimco Income. But when comparing it to its historical volatility, California Bond Fund is 1.47 times less risky than Pimco Income. It trades about 0.44 of its potential returns per unit of risk. Pimco Income Fund is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1,056 in Pimco Income Fund on September 13, 2024 and sell it today you would earn a total of 11.00 from holding Pimco Income Fund or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Bond Fund vs. Pimco Income Fund
Performance |
| Timeline |
| California Bond |
| Pimco Income |
California Bond and Pimco Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Pimco Income
The main advantage of trading using opposite California Bond and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond 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.| California Bond vs. Income Fund Income | California Bond vs. Usaa Nasdaq 100 | California Bond vs. Victory Diversified Stock | California Bond vs. Intermediate Term Bond Fund |
| Pimco Income vs. Doubleline Yield Opportunities | Pimco Income vs. Pace High Yield | Pimco Income vs. T Rowe Price | Pimco Income vs. Morningstar Defensive Bond |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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