Correlation Between International Business and PIMCO Preferred

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

By analyzing existing cross correlation between International Business Machines and PIMCO Preferred And, you can compare the effects of market volatilities on International Business and PIMCO Preferred 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 International Business with a short position of PIMCO Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and PIMCO Preferred.

Diversification Opportunities for International Business and PIMCO Preferred

0.69

Correlation Coefficient

International Business  PIMCO Preferred

Poor diversification

The 3 months correlation between International and PIMCO is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and PIMCO Preferred And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Preferred And and International Business 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 International Business Machines are associated (or correlated) with PIMCO Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Preferred And has no effect on the direction of International Business i.e., International Business and PIMCO Preferred go up and down completely randomly.

Pair Corralation between International Business and PIMCO Preferred

Considering the 90-day investment horizon International Business Machines is expected to generate 12.1 times more return on investment than PIMCO Preferred. However, International Business is 12.1 times more volatile than PIMCO Preferred And. It trades about 0.08 of its potential returns per unit of risk. PIMCO Preferred And is currently generating about 0.16 per unit of risk. If you would invest  22,046  in International Business Machines on December 21, 2024 and sell it today you would earn a total of  2,286  from holding International Business Machines or generate 10.37% return on investment over 90 days.

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

International Business Machine  vs.  PIMCO Preferred And

International Business

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, International Business may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PIMCO Preferred And

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Preferred And are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, PIMCO Preferred is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with International Business and PIMCO Preferred

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

The idea behind International Business Machines and PIMCO Preferred And 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..