Correlation Between PIMCO 15 and SPDR Portfolio

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

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

Diversification Opportunities for PIMCO 15 and SPDR Portfolio

0.98

Correlation Coefficient

PIMCO 15  SPDR Portfolio

Almost no diversification

The 3 months correlation between PIMCO and SPDR is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO 15 Year and SPDR Portfolio TIPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio TIPS and PIMCO 15 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 15 Year are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio TIPS has no effect on the direction of PIMCO 15 i.e., PIMCO 15 and SPDR Portfolio go up and down completely randomly.

Pair Corralation between PIMCO 15 and SPDR Portfolio

Given the investment horizon of 90 days PIMCO 15 Year is expected to under-perform the SPDR Portfolio. In addition to that, PIMCO 15 is 2.36 times more volatile than SPDR Portfolio TIPS. It trades about -0.02 of its total potential returns per unit of risk. SPDR Portfolio TIPS is currently generating about 0.02 per unit of volatility. If you would invest  2,458  in SPDR Portfolio TIPS on October 3, 2024 and sell it today you would earn a total of  73.00  from holding SPDR Portfolio TIPS or generate 2.97% return on investment over 90 days.

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

PIMCO 15 Year  vs.  SPDR Portfolio TIPS

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 unsteady 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.

SPDR Portfolio TIPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Portfolio TIPS has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, SPDR Portfolio is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PIMCO 15 and SPDR Portfolio

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

The idea behind PIMCO 15 Year and SPDR Portfolio TIPS 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.