Correlation Between Western Asset and Pimco Income
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Pimco Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Municipal and Pimco Income Fund, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Pimco Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Pimco Income.
Diversification Opportunities for Western Asset and Pimco Income
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Pimco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Pimco Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income and Western Asset 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 Western Asset Municipal 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 Western Asset i.e., Western Asset and Pimco Income go up and down completely randomly.
Pair Corralation between Western Asset and Pimco Income
Assuming the 90 days horizon Western Asset is expected to generate 1.08 times less return on investment than Pimco Income. In addition to that, Western Asset is 1.61 times more volatile than Pimco Income Fund. It trades about 0.11 of its total potential returns per unit of risk. Pimco Income Fund is currently generating about 0.18 per unit of volatility. If you would invest 1,056 in Pimco Income Fund on September 1, 2024 and sell it today you would earn a total of 10.00 from holding Pimco Income Fund or generate 0.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Western Asset Municipal vs. Pimco Income Fund
Performance |
| Timeline |
| Western Asset Municipal |
| Pimco Income |
Western Asset and Pimco Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Pimco Income
The main advantage of trading using opposite Western Asset and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Lord Abbett Diversified | Western Asset vs. Blackrock Conservative Prprdptfinstttnl | Western Asset vs. Pioneer Diversified High | Western Asset vs. Aqr Diversified Arbitrage |
| Pimco Income vs. Cutler Equity | Pimco Income vs. Small Cap Equity | Pimco Income vs. Icon Equity Income | Pimco Income vs. The Gabelli Equity |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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