Correlation Between Intermediate Government and Pimco Equity

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

By analyzing existing cross correlation between Intermediate Government Bond and Pimco Equity Series, you can compare the effects of market volatilities on Intermediate Government and Pimco Equity 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 Intermediate Government with a short position of Pimco Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Government and Pimco Equity.

Diversification Opportunities for Intermediate Government and Pimco Equity

0.1

Correlation Coefficient

Intermediate Government  Pimco Equity

Average diversification

The 3 months correlation between Intermediate and Pimco is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Government Bond and Pimco Equity Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Equity Series and Intermediate Government 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 Intermediate Government Bond are associated (or correlated) with Pimco Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Equity Series has no effect on the direction of Intermediate Government i.e., Intermediate Government and Pimco Equity go up and down completely randomly.

Pair Corralation between Intermediate Government and Pimco Equity

Assuming the 90 days horizon Intermediate Government Bond is expected to generate 0.12 times more return on investment than Pimco Equity. However, Intermediate Government Bond is 8.49 times less risky than Pimco Equity. It trades about 0.03 of its potential returns per unit of risk. Pimco Equity Series is currently generating about -0.16 per unit of risk. If you would invest  944.00  in Intermediate Government Bond on October 11, 2024 and sell it today you would earn a total of  1.00  from holding Intermediate Government Bond or generate 0.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Intermediate Government Bond  vs.  Pimco Equity Series

Intermediate Government

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Government Bond are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Intermediate Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Equity Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Equity Series has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Pimco Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Intermediate Government and Pimco Equity

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

The idea behind Intermediate Government Bond and Pimco Equity Series 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.