Correlation Between PIMCO ETF and Madison Covered

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

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

Diversification Opportunities for PIMCO ETF and Madison Covered

0.49

Correlation Coefficient

PIMCO ETF  Madison Covered

Very weak diversification

The 3 months correlation between PIMCO and Madison is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO ETF Trust and Madison Covered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Covered Call and PIMCO ETF 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 PIMCO ETF Trust are associated (or correlated) with Madison Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Covered Call has no effect on the direction of PIMCO ETF i.e., PIMCO ETF and Madison Covered go up and down completely randomly.

Pair Corralation between PIMCO ETF and Madison Covered

Given the investment horizon of 90 days PIMCO ETF Trust is expected to generate 0.23 times more return on investment than Madison Covered. However, PIMCO ETF Trust is 4.3 times less risky than Madison Covered. It trades about -0.02 of its potential returns per unit of risk. Madison Covered Call is currently generating about -0.19 per unit of risk. If you would invest  5,052  in PIMCO ETF Trust on December 28, 2024 and sell it today you would lose (6.00) from holding PIMCO ETF Trust or give up 0.12% of portfolio value over 90 days.

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

PIMCO ETF Trust  vs.  Madison Covered Call

PIMCO ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days PIMCO ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, PIMCO ETF is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Madison Covered Call

Risk-Adjusted Performance

Very Weak

Over the last 90 days Madison Covered Call has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with PIMCO ETF and Madison Covered

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

The idea behind PIMCO ETF Trust and Madison Covered Call 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.