Correlation Between Columbia Multi and PIMCO ETF

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

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

Diversification Opportunities for Columbia Multi and PIMCO ETF

0.9

Correlation Coefficient

Columbia Multi  PIMCO ETF

Almost no diversification

The 3 months correlation between Columbia and PIMCO is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Multi Sector Municipa and PIMCO ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO ETF Trust and Columbia Multi 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 Columbia Multi Sector Municipal are associated (or correlated) with PIMCO ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO ETF Trust has no effect on the direction of Columbia Multi i.e., Columbia Multi and PIMCO ETF go up and down completely randomly.

Pair Corralation between Columbia Multi and PIMCO ETF

Given the investment horizon of 90 days Columbia Multi Sector Municipal is expected to generate 1.25 times more return on investment than PIMCO ETF. However, Columbia Multi is 1.25 times more volatile than PIMCO ETF Trust. It trades about 0.07 of its potential returns per unit of risk. PIMCO ETF Trust is currently generating about 0.05 per unit of risk. If you would invest  2,046  in Columbia Multi Sector Municipal on September 12, 2024 and sell it today you would earn a total of  32.00  from holding Columbia Multi Sector Municipal or generate 1.56% return on investment over 90 days.

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

Columbia Multi Sector Municipa  vs.  PIMCO ETF Trust

Columbia Multi Sector

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Multi Sector Municipal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Columbia Multi is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

PIMCO ETF Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO ETF Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, PIMCO ETF is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Columbia Multi and PIMCO ETF

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

The idea behind Columbia Multi Sector Municipal and PIMCO ETF Trust 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.