Correlation Between PIMCO Mortgage and Invesco BulletShares

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

By analyzing existing cross correlation between PIMCO Mortgage Backed Securities and Invesco BulletShares 2030, you can compare the effects of market volatilities on PIMCO Mortgage and Invesco BulletShares 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 Mortgage with a short position of Invesco BulletShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Mortgage and Invesco BulletShares.

Diversification Opportunities for PIMCO Mortgage and Invesco BulletShares

0.69

Correlation Coefficient

PIMCO Mortgage  Invesco BulletShares

Poor diversification

The 3 months correlation between PIMCO and Invesco is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Mortgage Backed Securiti and Invesco BulletShares 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco BulletShares 2030 and PIMCO Mortgage 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 Mortgage Backed Securities are associated (or correlated) with Invesco BulletShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco BulletShares 2030 has no effect on the direction of PIMCO Mortgage i.e., PIMCO Mortgage and Invesco BulletShares go up and down completely randomly.

Pair Corralation between PIMCO Mortgage and Invesco BulletShares

Given the investment horizon of 90 days PIMCO Mortgage Backed Securities is expected to under-perform the Invesco BulletShares. In addition to that, PIMCO Mortgage is 1.19 times more volatile than Invesco BulletShares 2030. It trades about -0.13 of its total potential returns per unit of risk. Invesco BulletShares 2030 is currently generating about 0.05 per unit of volatility. If you would invest  1,617  in Invesco BulletShares 2030 on September 21, 2024 and sell it today you would earn a total of  24.00  from holding Invesco BulletShares 2030 or generate 1.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	59.81%
Values	Daily Returns

PIMCO Mortgage Backed Securiti  vs.  Invesco BulletShares 2030

PIMCO Mortgage Backed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO Mortgage Backed Securities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, PIMCO Mortgage is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco BulletShares 2030

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco BulletShares 2030 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Invesco BulletShares is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PIMCO Mortgage and Invesco BulletShares

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

The idea behind PIMCO Mortgage Backed Securities and Invesco BulletShares 2030 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.