Correlation Between Inverse Government and Pimco Commodityrealret

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

By analyzing existing cross correlation between Inverse Government Long and Pimco Modityrealreturn Strategy, you can compare the effects of market volatilities on Inverse Government and Pimco Commodityrealret 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 Inverse Government with a short position of Pimco Commodityrealret. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Government and Pimco Commodityrealret.

Diversification Opportunities for Inverse Government and Pimco Commodityrealret

0.39

Correlation Coefficient

Inverse Government  Pimco Commodityrealret

Weak diversification

The 3 months correlation between Inverse and PIMCO is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Government Long and Pimco Modityrealreturn Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Modityrealreturn and Inverse Government 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 Inverse Government Long are associated (or correlated) with Pimco Commodityrealret. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Modityrealreturn has no effect on the direction of Inverse Government i.e., Inverse Government and Pimco Commodityrealret go up and down completely randomly.

Pair Corralation between Inverse Government and Pimco Commodityrealret

Assuming the 90 days horizon Inverse Government is expected to generate 1.17 times less return on investment than Pimco Commodityrealret. In addition to that, Inverse Government is 1.05 times more volatile than Pimco Modityrealreturn Strategy. It trades about 0.07 of its total potential returns per unit of risk. Pimco Modityrealreturn Strategy is currently generating about 0.08 per unit of volatility. If you would invest  1,264  in Pimco Modityrealreturn Strategy on October 22, 2024 and sell it today you would earn a total of  104.00  from holding Pimco Modityrealreturn Strategy or generate 8.23% return on investment over 90 days.

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

Inverse Government Long  vs.  Pimco Modityrealreturn Strateg

Inverse Government Long

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Government Long are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Inverse Government may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pimco Modityrealreturn

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Modityrealreturn Strategy are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Commodityrealret is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Inverse Government and Pimco Commodityrealret

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

The idea behind Inverse Government Long and Pimco Modityrealreturn Strategy 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.