Correlation Between IShares Trust and PIMCO Active

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

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

Diversification Opportunities for IShares Trust and PIMCO Active

0.98

Correlation Coefficient

IShares Trust  PIMCO Active

Almost no diversification

The 3 months correlation between IShares and PIMCO is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and PIMCO Active Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Active Bond and IShares Trust 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 Trust are associated (or correlated) with PIMCO Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Active Bond has no effect on the direction of IShares Trust i.e., IShares Trust and PIMCO Active go up and down completely randomly.

Pair Corralation between IShares Trust and PIMCO Active

Given the investment horizon of 90 days iShares Trust is expected to under-perform the PIMCO Active. In addition to that, IShares Trust is 1.01 times more volatile than PIMCO Active Bond. It trades about -0.04 of its total potential returns per unit of risk. PIMCO Active Bond is currently generating about -0.03 per unit of volatility. If you would invest  9,093  in PIMCO Active Bond on October 25, 2024 and sell it today you would lose (54.00) from holding PIMCO Active Bond or give up 0.59% of portfolio value over 90 days.

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

iShares Trust   vs.  PIMCO Active Bond

iShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PIMCO Active Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Active Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PIMCO Active is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Trust and PIMCO Active

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

The idea behind iShares Trust and PIMCO Active 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.