Correlation Between PIMCO ETF and IShares MSCI

Can any of the company-specific risk be diversified away by investing in both PIMCO ETF and IShares MSCI 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 IShares MSCI 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 iShares MSCI EAFE, you can compare the effects of market volatilities on PIMCO ETF and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO ETF and IShares MSCI.

Diversification Opportunities for PIMCO ETF and IShares MSCI

-0.33

Correlation Coefficient

PIMCO ETF  IShares MSCI

Very good diversification

The 3 months correlation between PIMCO and IShares is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO ETF Trust and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of PIMCO ETF i.e., PIMCO ETF and IShares MSCI go up and down completely randomly.

Pair Corralation between PIMCO ETF and IShares MSCI

Given the investment horizon of 90 days PIMCO ETF Trust is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, PIMCO ETF Trust is 7.32 times less risky than IShares MSCI. The etf trades about -0.02 of its potential returns per unit of risk. The iShares MSCI EAFE is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,085  in iShares MSCI EAFE on December 28, 2024 and sell it today you would earn a total of  346.00  from holding iShares MSCI EAFE or generate 5.69% return on investment over 90 days.

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

PIMCO ETF Trust  vs.  iShares MSCI EAFE

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.

iShares MSCI EAFE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI EAFE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PIMCO ETF and IShares MSCI

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

The idea behind PIMCO ETF Trust and iShares MSCI EAFE 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.