Correlation Between Pimco Income and American Funds

Can any of the company-specific risk be diversified away by investing in both Pimco Income and American Funds 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 Pimco Income and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pimco Income Fund and American Funds Multi Sector, you can compare the effects of market volatilities on Pimco Income and American Funds 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 Pimco Income with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Income and American Funds.

Diversification Opportunities for Pimco Income and American Funds

0.86

Correlation Coefficient

Pimco Income  American Funds

Very poor diversification

The 3 months correlation between Pimco and American is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Income Fund and American Funds Multi Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Multi and Pimco Income 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 Pimco Income Fund are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Multi has no effect on the direction of Pimco Income i.e., Pimco Income and American Funds go up and down completely randomly.

Pair Corralation between Pimco Income and American Funds

Assuming the 90 days horizon Pimco Income is expected to generate 1.06 times less return on investment than American Funds. In addition to that, Pimco Income is 1.0 times more volatile than American Funds Multi Sector. It trades about 0.04 of its total potential returns per unit of risk. American Funds Multi Sector is currently generating about 0.04 per unit of volatility. If you would invest  853.00  in American Funds Multi Sector on January 24, 2024 and sell it today you would earn a total of  63.00  from holding American Funds Multi Sector or generate 7.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Pimco Income Fund  vs.  American Funds Multi Sector

Pimco Me Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Income Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pimco Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Funds Multi

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Multi Sector are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pimco Income and American Funds

The main advantage of trading using opposite Pimco Income and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pimco Income position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.

The idea behind Pimco Income Fund and American Funds Multi Sector 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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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.