Correlation Between PIMCO Mortgage and UST Inc

Can any of the company-specific risk be diversified away by investing in both PIMCO Mortgage and UST Inc 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 UST Inc 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 ProShares Ultra 7 10, you can compare the effects of market volatilities on PIMCO Mortgage and UST Inc 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 UST Inc. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Mortgage and UST Inc.

Diversification Opportunities for PIMCO Mortgage and UST Inc

0.99

Correlation Coefficient

PIMCO Mortgage  UST Inc

No risk reduction

The 3 months correlation between PIMCO and UST is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Mortgage Backed Securiti and ProShares Ultra 7 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra 7 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 UST Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra 7 has no effect on the direction of PIMCO Mortgage i.e., PIMCO Mortgage and UST Inc go up and down completely randomly.

Pair Corralation between PIMCO Mortgage and UST Inc

Given the investment horizon of 90 days PIMCO Mortgage is expected to generate 1.85 times less return on investment than UST Inc. But when comparing it to its historical volatility, PIMCO Mortgage Backed Securities is 2.63 times less risky than UST Inc. It trades about 0.15 of its potential returns per unit of risk. ProShares Ultra 7 10 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,053  in ProShares Ultra 7 10 on December 26, 2024 and sell it today you would earn a total of  219.00  from holding ProShares Ultra 7 10 or generate 5.4% return on investment over 90 days.

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

PIMCO Mortgage Backed Securiti  vs.  ProShares Ultra 7 10

PIMCO Mortgage Backed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Mortgage Backed Securities are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. 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.

ProShares Ultra 7

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra 7 10 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, UST Inc 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 UST Inc

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

The idea behind PIMCO Mortgage Backed Securities and ProShares Ultra 7 10 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.