Correlation Between PIMCO Mortgage and SPDR SSGA

Can any of the company-specific risk be diversified away by investing in both PIMCO Mortgage and SPDR SSGA 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 SPDR SSGA 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 SPDR SSGA My2028, you can compare the effects of market volatilities on PIMCO Mortgage and SPDR SSGA 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 SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Mortgage and SPDR SSGA.

Diversification Opportunities for PIMCO Mortgage and SPDR SSGA

0.6

Correlation Coefficient

PIMCO Mortgage  SPDR SSGA

Poor diversification

The 3 months correlation between PIMCO and SPDR is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Mortgage Backed Securiti and SPDR SSGA My2028 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA My2028 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 SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA My2028 has no effect on the direction of PIMCO Mortgage i.e., PIMCO Mortgage and SPDR SSGA go up and down completely randomly.

Pair Corralation between PIMCO Mortgage and SPDR SSGA

Given the investment horizon of 90 days PIMCO Mortgage Backed Securities is expected to under-perform the SPDR SSGA. In addition to that, PIMCO Mortgage is 2.02 times more volatile than SPDR SSGA My2028. It trades about -0.34 of its total potential returns per unit of risk. SPDR SSGA My2028 is currently generating about -0.3 per unit of volatility. If you would invest  2,483  in SPDR SSGA My2028 on October 8, 2024 and sell it today you would lose (21.00) from holding SPDR SSGA My2028 or give up 0.85% of portfolio value over 90 days.

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

PIMCO Mortgage Backed Securiti  vs.  SPDR SSGA My2028

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.

SPDR SSGA My2028

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SSGA My2028 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, SPDR SSGA is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with PIMCO Mortgage and SPDR SSGA

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

The idea behind PIMCO Mortgage Backed Securities and SPDR SSGA My2028 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.