Correlation Between Pimco Long and Vanguard Long-term

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

By analyzing existing cross correlation between Pimco Long Duration and Vanguard Long Term Bond, you can compare the effects of market volatilities on Pimco Long and Vanguard Long-term 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 Vanguard Long-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Long and Vanguard Long-term.

Diversification Opportunities for Pimco Long and Vanguard Long-term

1.0

Correlation Coefficient

Pimco Long  Vanguard Long-term

No risk reduction

The 3 months correlation between Pimco and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Long Duration and Vanguard Long Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Long Term 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 Duration are associated (or correlated) with Vanguard Long-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Long Term has no effect on the direction of Pimco Long i.e., Pimco Long and Vanguard Long-term go up and down completely randomly.

Pair Corralation between Pimco Long and Vanguard Long-term

Assuming the 90 days horizon Pimco Long Duration is expected to generate 0.94 times more return on investment than Vanguard Long-term. However, Pimco Long Duration is 1.06 times less risky than Vanguard Long-term. It trades about -0.05 of its potential returns per unit of risk. Vanguard Long Term Bond is currently generating about -0.05 per unit of risk. If you would invest  755.00  in Pimco Long Duration on September 4, 2024 and sell it today you would lose (18.00) from holding Pimco Long Duration or give up 2.38% 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 Duration  vs.  Vanguard Long Term Bond

Pimco Long Duration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Long Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Long Term Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Vanguard Long-term 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 Long and Vanguard Long-term

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

The idea behind Pimco Long Duration and Vanguard Long Term 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.