Correlation Between IShares Fundamental and PIMCO Monthly

Can any of the company-specific risk be diversified away by investing in both IShares Fundamental and PIMCO Monthly 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 IShares Fundamental and PIMCO Monthly into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Fundamental Hedged and PIMCO Monthly Income, you can compare the effects of market volatilities on IShares Fundamental and PIMCO Monthly 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 IShares Fundamental with a short position of PIMCO Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Fundamental and PIMCO Monthly.

Diversification Opportunities for IShares Fundamental and PIMCO Monthly

0.07

Correlation Coefficient

IShares Fundamental  PIMCO Monthly

Significant diversification

The 3 months correlation between IShares and PIMCO is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fundamental Hedged and PIMCO Monthly Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Monthly Income and IShares Fundamental 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 iShares Fundamental Hedged are associated (or correlated) with PIMCO Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Monthly Income has no effect on the direction of IShares Fundamental i.e., IShares Fundamental and PIMCO Monthly go up and down completely randomly.

Pair Corralation between IShares Fundamental and PIMCO Monthly

Assuming the 90 days trading horizon iShares Fundamental Hedged is expected to generate 2.74 times more return on investment than PIMCO Monthly. However, IShares Fundamental is 2.74 times more volatile than PIMCO Monthly Income. It trades about 0.07 of its potential returns per unit of risk. PIMCO Monthly Income is currently generating about -0.02 per unit of risk. If you would invest  4,319  in iShares Fundamental Hedged on October 4, 2024 and sell it today you would earn a total of  1,078  from holding iShares Fundamental Hedged or generate 24.96% return on investment over 90 days.

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

iShares Fundamental Hedged  vs.  PIMCO Monthly Income

iShares Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Fundamental Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Fundamental is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

PIMCO Monthly Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Monthly Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable basic indicators, PIMCO Monthly is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Fundamental and PIMCO Monthly

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

The idea behind iShares Fundamental Hedged and PIMCO Monthly Income 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.