Correlation Between IShares 0 and PIMCO Enhanced

Can any of the company-specific risk be diversified away by investing in both IShares 0 and PIMCO Enhanced 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 IShares 0 and PIMCO Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 0 3 Month and PIMCO Enhanced Short, you can compare the effects of market volatilities on IShares 0 and PIMCO Enhanced 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 IShares 0 with a short position of PIMCO Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 0 and PIMCO Enhanced.

Diversification Opportunities for IShares 0 and PIMCO Enhanced

1.0

Correlation Coefficient

IShares 0  PIMCO Enhanced

No risk reduction

The 3 months correlation between IShares and PIMCO is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares 0 3 Month and PIMCO Enhanced Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Enhanced Short and IShares 0 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 iShares 0 3 Month are associated (or correlated) with PIMCO Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Enhanced Short has no effect on the direction of IShares 0 i.e., IShares 0 and PIMCO Enhanced go up and down completely randomly.

Pair Corralation between IShares 0 and PIMCO Enhanced

Given the investment horizon of 90 days IShares 0 is expected to generate 1.12 times less return on investment than PIMCO Enhanced. But when comparing it to its historical volatility, iShares 0 3 Month is 1.81 times less risky than PIMCO Enhanced. It trades about 1.37 of its potential returns per unit of risk. PIMCO Enhanced Short is currently generating about 0.85 of returns per unit of risk over similar time horizon. If you would invest  9,948  in PIMCO Enhanced Short on December 28, 2024 and sell it today you would earn a total of  114.00  from holding PIMCO Enhanced Short or generate 1.15% return on investment over 90 days.

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

iShares 0 3 Month  vs.  PIMCO Enhanced Short

iShares 0 3

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 0 3 Month are ranked lower than 96 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares 0 is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

PIMCO Enhanced Short

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Enhanced Short are ranked lower than 66 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PIMCO Enhanced is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares 0 and PIMCO Enhanced

The main advantage of trading using opposite IShares 0 and PIMCO Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 0 position performs unexpectedly, PIMCO Enhanced 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 Enhanced will offset losses from the drop in PIMCO Enhanced's long position.

The idea behind iShares 0 3 Month and PIMCO Enhanced Short 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.