Correlation Between High Yield and Pimco Emerging

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

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

Diversification Opportunities for High Yield and Pimco Emerging

0.85

Correlation Coefficient

High Yield  Pimco Emerging

Very poor diversification

The 3 months correlation between High and Pimco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Fund and Pimco Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Emerging Markets and High Yield 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 High Yield Fund are associated (or correlated) with Pimco Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Emerging Markets has no effect on the direction of High Yield i.e., High Yield and Pimco Emerging go up and down completely randomly.

Pair Corralation between High Yield and Pimco Emerging

Assuming the 90 days horizon High Yield is expected to generate 2.14 times less return on investment than Pimco Emerging. But when comparing it to its historical volatility, High Yield Fund is 1.39 times less risky than Pimco Emerging. It trades about 0.22 of its potential returns per unit of risk. Pimco Emerging Markets is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  622.00  in Pimco Emerging Markets on July 31, 2025 and sell it today you would earn a total of  32.00  from holding Pimco Emerging Markets or generate 5.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

High Yield Fund  vs.  Pimco Emerging Markets

High Yield Fund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, High Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Emerging Markets

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Emerging Markets are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pimco Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with High Yield and Pimco Emerging

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

The idea behind High Yield Fund and Pimco Emerging Markets 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.