Correlation Between Inverse Government and Pimco High

Can any of the company-specific risk be diversified away by investing in both Inverse Government and Pimco High 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 High 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 High Yield, you can compare the effects of market volatilities on Inverse Government and Pimco High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Government and Pimco High.

Diversification Opportunities for Inverse Government and Pimco High

-0.12

Correlation Coefficient

Inverse Government  Pimco High

Good diversification

The 3 months correlation between Inverse and Pimco is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Government Long and Pimco High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco High Yield 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco High Yield has no effect on the direction of Inverse Government i.e., Inverse Government and Pimco High go up and down completely randomly.

Pair Corralation between Inverse Government and Pimco High

Assuming the 90 days horizon Inverse Government Long is expected to generate 3.76 times more return on investment than Pimco High. However, Inverse Government is 3.76 times more volatile than Pimco High Yield. It trades about 0.01 of its potential returns per unit of risk. Pimco High Yield is currently generating about -0.07 per unit of risk. If you would invest  18,510  in Inverse Government Long on October 6, 2024 and sell it today you would earn a total of  74.00  from holding Inverse Government Long or generate 0.4% return on investment over 90 days.

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

Inverse Government Long  vs.  Pimco High Yield

Inverse Government Long

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pimco High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pimco High 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 High

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

The idea behind Inverse Government Long and Pimco High Yield 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 Commodity Directory module to find actively traded commodities issued by global exchanges.