Correlation Between IShares National and PIMCO Intermediate

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

By analyzing existing cross correlation between iShares National Muni and PIMCO Intermediate Municipal, you can compare the effects of market volatilities on IShares National and PIMCO Intermediate 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 IShares National with a short position of PIMCO Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares National and PIMCO Intermediate.

Diversification Opportunities for IShares National and PIMCO Intermediate

0.92

Correlation Coefficient

IShares National  PIMCO Intermediate

Almost no diversification

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

Pair Corralation between IShares National and PIMCO Intermediate

Considering the 90-day investment horizon iShares National Muni is expected to under-perform the PIMCO Intermediate. In addition to that, IShares National is 1.11 times more volatile than PIMCO Intermediate Municipal. It trades about -0.09 of its total potential returns per unit of risk. PIMCO Intermediate Municipal is currently generating about -0.03 per unit of volatility. If you would invest  5,146  in PIMCO Intermediate Municipal on December 28, 2024 and sell it today you would lose (20.00) from holding PIMCO Intermediate Municipal or give up 0.39% of portfolio value over 90 days.

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

iShares National Muni  vs.  PIMCO Intermediate Municipal

iShares National Muni

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares National Muni has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PIMCO Intermediate

Risk-Adjusted Performance

Very Weak

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

Pair Trading with IShares National and PIMCO Intermediate

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

The idea behind iShares National Muni and PIMCO Intermediate Municipal 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.