Correlation Between Sierra E and Pimco Income
Can any of the company-specific risk be diversified away by investing in both Sierra E 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 Sierra E and Pimco Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sierra E Retirement and Pimco Income Fund, you can compare the effects of market volatilities on Sierra E 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 Sierra E with a short position of Pimco Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra E and Pimco Income.
Diversification Opportunities for Sierra E and Pimco Income
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sierra and Pimco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Pimco Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Me Fund and Sierra E 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 Sierra E Retirement 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 Me Fund has no effect on the direction of Sierra E i.e., Sierra E and Pimco Income go up and down completely randomly.
Pair Corralation between Sierra E and Pimco Income
Assuming the 90 days horizon Sierra E is expected to generate 1.0 times less return on investment than Pimco Income. But when comparing it to its historical volatility, Sierra E Retirement is 1.08 times less risky than Pimco Income. It trades about 0.18 of its potential returns per unit of risk. Pimco Income Fund is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 968.00 in Pimco Income Fund on January 20, 2024 and sell it today you would earn a total of 69.00 from holding Pimco Income Fund or generate 7.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sierra E Retirement vs. Pimco Income Fund
Performance |
| Timeline |
| Sierra E Retirement |
| Pimco Me Fund |
Sierra E and Pimco Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sierra E and Pimco Income
The main advantage of trading using opposite Sierra E and Pimco Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra E 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.| Sierra E vs. Sierra Strategic Income | Sierra E vs. Sierra Strategic Income | Sierra E vs. Sierra Tactical Bond | Sierra E vs. Sierra Tactical Bond |
| Pimco Income vs. Pimco Rae Worldwide | Pimco Income vs. Pimco Rae Worldwide | Pimco Income vs. Pimco Rae Worldwide | Pimco Income 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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