Correlation Between Pimco Extended and Vanguard Extended

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

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

Diversification Opportunities for Pimco Extended and Vanguard Extended

0.96

Correlation Coefficient

Pimco Extended  Vanguard Extended

Almost no diversification

The 3 months correlation between Pimco and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Extended Duration and Vanguard Extended Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended and Pimco Extended 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 Extended Duration are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended has no effect on the direction of Pimco Extended i.e., Pimco Extended and Vanguard Extended go up and down completely randomly.

Pair Corralation between Pimco Extended and Vanguard Extended

Assuming the 90 days horizon Pimco Extended Duration is expected to under-perform the Vanguard Extended. In addition to that, Pimco Extended is 1.01 times more volatile than Vanguard Extended Duration. It trades about -0.12 of its total potential returns per unit of risk. Vanguard Extended Duration is currently generating about -0.1 per unit of volatility. If you would invest  2,449  in Vanguard Extended Duration on September 13, 2024 and sell it today you would lose (208.00) from holding Vanguard Extended Duration or give up 8.49% of portfolio value over 90 days.

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

Pimco Extended Duration  vs.  Vanguard Extended Duration

Pimco Extended Duration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Extended Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Vanguard Extended

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Extended Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Pimco Extended and Vanguard Extended

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

The idea behind Pimco Extended Duration and Vanguard Extended Duration 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.