Correlation Between Pimco Long and Pimco Extended

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

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

Diversification Opportunities for Pimco Long and Pimco Extended

0.99

Correlation Coefficient

Pimco Long  Pimco Extended

No risk reduction

The 3 months correlation between Pimco and Pimco is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Long Term Credit and Pimco Extended Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Extended Duration and Pimco Long 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 Long Term Credit are associated (or correlated) with Pimco Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Extended Duration has no effect on the direction of Pimco Long i.e., Pimco Long and Pimco Extended go up and down completely randomly.

Pair Corralation between Pimco Long and Pimco Extended

Assuming the 90 days horizon Pimco Long is expected to generate 42.12 times less return on investment than Pimco Extended. But when comparing it to its historical volatility, Pimco Long Term Credit is 16.46 times less risky than Pimco Extended. It trades about 0.01 of its potential returns per unit of risk. Pimco Extended Duration is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,642  in Pimco Extended Duration on September 5, 2024 and sell it today you would lose (251.00) from holding Pimco Extended Duration or give up 15.29% of portfolio value over 90 days.

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

Pimco Long Term Credit  vs.  Pimco Extended Duration

Pimco Long Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Long Term Credit has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Pimco Long is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Pimco Long and Pimco Extended

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

The idea behind Pimco Long Term Credit and Pimco 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.