Correlation Between Us Treasury and Pimco Extended

Can any of the company-specific risk be diversified away by investing in both Us Treasury and Pimco Extended 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 Us Treasury and Pimco Extended into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Us Treasury Long Term and Pimco Extended Duration, you can compare the effects of market volatilities on Us Treasury and Pimco Extended 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 Us Treasury with a short position of Pimco Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Treasury and Pimco Extended.

Diversification Opportunities for Us Treasury and Pimco Extended

0.77

Correlation Coefficient

Us Treasury  Pimco Extended

Poor diversification

The 3 months correlation between PRULX and Pimco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Us Treasury Long Term and Pimco Extended Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Extended Duration and Us Treasury 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 Us Treasury Long Term are associated (or correlated) with Pimco Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Extended Duration has no effect on the direction of Us Treasury i.e., Us Treasury and Pimco Extended go up and down completely randomly.

Pair Corralation between Us Treasury and Pimco Extended

Assuming the 90 days horizon Us Treasury is expected to generate 1.14 times less return on investment than Pimco Extended. But when comparing it to its historical volatility, Us Treasury Long Term is 1.48 times less risky than Pimco Extended. It trades about 0.04 of its potential returns per unit of risk. Pimco Extended Duration is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,273  in Pimco Extended Duration on October 24, 2024 and sell it today you would earn a total of  6.00  from holding Pimco Extended Duration or generate 0.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Us Treasury Long Term  vs.  Pimco Extended Duration

Us Treasury Long

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Us Treasury Long Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Us Treasury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Extended Duration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Extended Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Pimco Extended is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Us Treasury and Pimco Extended

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

The idea behind Us Treasury Long Term and Pimco Extended Duration 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.