Correlation Between JPMorgan Inflation and PIMCO 15

Can any of the company-specific risk be diversified away by investing in both JPMorgan Inflation and PIMCO 15 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 JPMorgan Inflation and PIMCO 15 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JPMorgan Inflation Managed and PIMCO 15 Year, you can compare the effects of market volatilities on JPMorgan Inflation and PIMCO 15 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 JPMorgan Inflation with a short position of PIMCO 15. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Inflation and PIMCO 15.

Diversification Opportunities for JPMorgan Inflation and PIMCO 15

0.88

Correlation Coefficient

JPMorgan Inflation  PIMCO 15

Very poor diversification

The 3 months correlation between JPMorgan and PIMCO is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Inflation Managed and PIMCO 15 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO 15 Year and JPMorgan Inflation 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 JPMorgan Inflation Managed are associated (or correlated) with PIMCO 15. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO 15 Year has no effect on the direction of JPMorgan Inflation i.e., JPMorgan Inflation and PIMCO 15 go up and down completely randomly.

Pair Corralation between JPMorgan Inflation and PIMCO 15

Given the investment horizon of 90 days JPMorgan Inflation Managed is expected to generate 0.35 times more return on investment than PIMCO 15. However, JPMorgan Inflation Managed is 2.85 times less risky than PIMCO 15. It trades about -0.15 of its potential returns per unit of risk. PIMCO 15 Year is currently generating about -0.31 per unit of risk. If you would invest  4,708  in JPMorgan Inflation Managed on September 26, 2024 and sell it today you would lose (33.00) from holding JPMorgan Inflation Managed or give up 0.7% of portfolio value over 90 days.

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

JPMorgan Inflation Managed  vs.  PIMCO 15 Year

JPMorgan Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan Inflation Managed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, JPMorgan Inflation is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

PIMCO 15 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO 15 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with JPMorgan Inflation and PIMCO 15

The main advantage of trading using opposite JPMorgan Inflation and PIMCO 15 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Inflation position performs unexpectedly, PIMCO 15 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 15 will offset losses from the drop in PIMCO 15's long position.

The idea behind JPMorgan Inflation Managed and PIMCO 15 Year 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.