Correlation Between PIMCO Enhanced and Vanguard Core

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

By analyzing existing cross correlation between PIMCO Enhanced Short and Vanguard Core Bond, you can compare the effects of market volatilities on PIMCO Enhanced and Vanguard Core 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 Enhanced with a short position of Vanguard Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Enhanced and Vanguard Core.

Diversification Opportunities for PIMCO Enhanced and Vanguard Core

0.92

Correlation Coefficient

PIMCO Enhanced  Vanguard Core

Almost no diversification

The 3 months correlation between PIMCO and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Enhanced Short and Vanguard Core Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Core Bond and PIMCO Enhanced 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 Enhanced Short are associated (or correlated) with Vanguard Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Core Bond has no effect on the direction of PIMCO Enhanced i.e., PIMCO Enhanced and Vanguard Core go up and down completely randomly.

Pair Corralation between PIMCO Enhanced and Vanguard Core

Given the investment horizon of 90 days PIMCO Enhanced is expected to generate 2.01 times less return on investment than Vanguard Core. But when comparing it to its historical volatility, PIMCO Enhanced Short is 13.0 times less risky than Vanguard Core. It trades about 0.86 of its potential returns per unit of risk. Vanguard Core Bond is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7,543  in Vanguard Core Bond on December 28, 2024 and sell it today you would earn a total of  176.00  from holding Vanguard Core Bond or generate 2.33% return on investment over 90 days.

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

PIMCO Enhanced Short  vs.  Vanguard Core Bond

PIMCO Enhanced Short

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Enhanced Short are ranked lower than 67 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PIMCO Enhanced is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard Core Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Core Bond are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Vanguard Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PIMCO Enhanced and Vanguard Core

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

The idea behind PIMCO Enhanced Short and Vanguard Core Bond 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.