Correlation Between PIMCO Investment and WisdomTree Corporate

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

By analyzing existing cross correlation between PIMCO Investment Grade and WisdomTree Corporate Bond, you can compare the effects of market volatilities on PIMCO Investment and WisdomTree Corporate 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 Investment with a short position of WisdomTree Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Investment and WisdomTree Corporate.

Diversification Opportunities for PIMCO Investment and WisdomTree Corporate

0.42

Correlation Coefficient

PIMCO Investment  WisdomTree Corporate

Very weak diversification

The 3 months correlation between PIMCO and WisdomTree is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Investment Grade and WisdomTree Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Corporate Bond and PIMCO Investment 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 Investment Grade are associated (or correlated) with WisdomTree Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Corporate Bond has no effect on the direction of PIMCO Investment i.e., PIMCO Investment and WisdomTree Corporate go up and down completely randomly.

Pair Corralation between PIMCO Investment and WisdomTree Corporate

Given the investment horizon of 90 days PIMCO Investment Grade is expected to generate 1.05 times more return on investment than WisdomTree Corporate. However, PIMCO Investment is 1.05 times more volatile than WisdomTree Corporate Bond. It trades about 0.11 of its potential returns per unit of risk. WisdomTree Corporate Bond is currently generating about 0.09 per unit of risk. If you would invest  9,451  in PIMCO Investment Grade on December 28, 2024 and sell it today you would earn a total of  205.00  from holding PIMCO Investment Grade or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.16%
Values	Daily Returns

PIMCO Investment Grade  vs.  WisdomTree Corporate Bond

PIMCO Investment Grade

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Investment Grade are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, PIMCO Investment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

WisdomTree Corporate Bond

Risk-Adjusted Performance

Modest

Over the last 90 days WisdomTree Corporate Bond has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, WisdomTree Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PIMCO Investment and WisdomTree Corporate

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

The idea behind PIMCO Investment Grade and WisdomTree Corporate Bond 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.