Correlation Between IPath Bloomberg and PIMCO ETF

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

By analyzing existing cross correlation between iPath Bloomberg Commodity and PIMCO ETF Trust, you can compare the effects of market volatilities on IPath Bloomberg and PIMCO ETF 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 IPath Bloomberg with a short position of PIMCO ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPath Bloomberg and PIMCO ETF.

Diversification Opportunities for IPath Bloomberg and PIMCO ETF

0.22

Correlation Coefficient

IPath Bloomberg  PIMCO ETF

Modest diversification

The 3 months correlation between IPath and PIMCO is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding iPath Bloomberg Commodity and PIMCO ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO ETF Trust and IPath Bloomberg 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 iPath Bloomberg Commodity are associated (or correlated) with PIMCO ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO ETF Trust has no effect on the direction of IPath Bloomberg i.e., IPath Bloomberg and PIMCO ETF go up and down completely randomly.

Pair Corralation between IPath Bloomberg and PIMCO ETF

Considering the 90-day investment horizon IPath Bloomberg is expected to generate 2.36 times less return on investment than PIMCO ETF. But when comparing it to its historical volatility, iPath Bloomberg Commodity is 7.89 times less risky than PIMCO ETF. It trades about 0.19 of its potential returns per unit of risk. PIMCO ETF Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,501  in PIMCO ETF Trust on November 28, 2024 and sell it today you would earn a total of  253.00  from holding PIMCO ETF Trust or generate 10.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

iPath Bloomberg Commodity  vs.  PIMCO ETF Trust

iPath Bloomberg Commodity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iPath Bloomberg Commodity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking indicators, IPath Bloomberg may actually be approaching a critical reversion point that can send shares even higher in March 2025.

PIMCO ETF Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO ETF Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, PIMCO ETF unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPath Bloomberg and PIMCO ETF

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

The idea behind iPath Bloomberg Commodity and PIMCO ETF Trust 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.