Correlation Between IShares VII and PIMCO Euro

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

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

Diversification Opportunities for IShares VII and PIMCO Euro

-0.59

Correlation Coefficient

IShares VII  PIMCO Euro

Excellent diversification

The 3 months correlation between IShares and PIMCO is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and PIMCO Euro Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Euro Short and IShares VII 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 VII PLC are associated (or correlated) with PIMCO Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Euro Short has no effect on the direction of IShares VII i.e., IShares VII and PIMCO Euro go up and down completely randomly.

Pair Corralation between IShares VII and PIMCO Euro

Assuming the 90 days trading horizon iShares VII PLC is expected to under-perform the PIMCO Euro. In addition to that, IShares VII is 9.38 times more volatile than PIMCO Euro Short Term. It trades about -0.07 of its total potential returns per unit of risk. PIMCO Euro Short Term is currently generating about 0.17 per unit of volatility. If you would invest  1,163  in PIMCO Euro Short Term on December 30, 2024 and sell it today you would earn a total of  15.00  from holding PIMCO Euro Short Term or generate 1.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares VII PLC  vs.  PIMCO Euro Short Term

iShares VII PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares VII PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares VII is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

PIMCO Euro Short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Euro Short Term are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, PIMCO Euro is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares VII and PIMCO Euro

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

The idea behind iShares VII PLC and PIMCO Euro Short Term 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.