Correlation Between PIMCO Mortgage and Vanguard Momentum

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

Diversification Opportunities for PIMCO Mortgage and Vanguard Momentum

-0.39

Correlation Coefficient

PIMCO Mortgage  Vanguard Momentum

Very good diversification

The 3 months correlation between PIMCO and Vanguard is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Mortgage Backed Securiti and Vanguard Momentum Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Momentum Factor 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 Vanguard Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Momentum Factor has no effect on the direction of PIMCO Mortgage i.e., PIMCO Mortgage and Vanguard Momentum go up and down completely randomly.

Pair Corralation between PIMCO Mortgage and Vanguard Momentum

Given the investment horizon of 90 days PIMCO Mortgage Backed Securities is expected to under-perform the Vanguard Momentum. But the etf apears to be less risky and, when comparing its historical volatility, PIMCO Mortgage Backed Securities is 3.53 times less risky than Vanguard Momentum. The etf trades about -0.06 of its potential returns per unit of risk. The Vanguard Momentum Factor is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12,226  in Vanguard Momentum Factor on September 12, 2024 and sell it today you would earn a total of  5,018  from holding Vanguard Momentum Factor or generate 41.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	15.91%
Values	Daily Returns

PIMCO Mortgage Backed Securiti  vs.  Vanguard Momentum Factor

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.

Vanguard Momentum Factor

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Momentum Factor are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, Vanguard Momentum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PIMCO Mortgage and Vanguard Momentum

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

The idea behind PIMCO Mortgage Backed Securities and Vanguard Momentum Factor 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.