Correlation Between PIMCO Mortgage and IShares III

Can any of the company-specific risk be diversified away by investing in both PIMCO Mortgage and IShares III 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 IShares III 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 IShares III Public, you can compare the effects of market volatilities on PIMCO Mortgage and IShares III 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 IShares III. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Mortgage and IShares III.

Diversification Opportunities for PIMCO Mortgage and IShares III

-0.71

Correlation Coefficient

PIMCO Mortgage  IShares III

Pay attention - limited upside

The 3 months correlation between PIMCO and IShares is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Mortgage Backed Securiti and IShares III Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares III Public 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 IShares III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares III Public has no effect on the direction of PIMCO Mortgage i.e., PIMCO Mortgage and IShares III go up and down completely randomly.

Pair Corralation between PIMCO Mortgage and IShares III

Given the investment horizon of 90 days PIMCO Mortgage Backed Securities is expected to under-perform the IShares III. In addition to that, PIMCO Mortgage is 1.27 times more volatile than IShares III Public. It trades about -0.14 of its total potential returns per unit of risk. IShares III Public is currently generating about 0.45 per unit of volatility. If you would invest  489.00  in IShares III Public on October 3, 2024 and sell it today you would earn a total of  3.00  from holding IShares III Public or generate 0.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	7.14%
Values	Daily Returns

PIMCO Mortgage Backed Securiti  vs.  IShares III Public

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

IShares III Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IShares III Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, IShares III is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PIMCO Mortgage and IShares III

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

The idea behind PIMCO Mortgage Backed Securities and IShares III Public 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.

Check out your portfolio center.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.