Correlation Between IShares 1 and PIMCO 25

Can any of the company-specific risk be diversified away by investing in both IShares 1 and PIMCO 25 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 1 and PIMCO 25 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 1 3 Year and PIMCO 25 Year, you can compare the effects of market volatilities on IShares 1 and PIMCO 25 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 1 with a short position of PIMCO 25. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and PIMCO 25.

Diversification Opportunities for IShares 1 and PIMCO 25

0.81

Correlation Coefficient

IShares 1  PIMCO 25

Very poor diversification

The 3 months correlation between IShares and PIMCO is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 3 Year and PIMCO 25 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO 25 Year and IShares 1 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 1 3 Year are associated (or correlated) with PIMCO 25. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO 25 Year has no effect on the direction of IShares 1 i.e., IShares 1 and PIMCO 25 go up and down completely randomly.

Pair Corralation between IShares 1 and PIMCO 25

Considering the 90-day investment horizon iShares 1 3 Year is expected to generate 0.07 times more return on investment than PIMCO 25. However, iShares 1 3 Year is 14.35 times less risky than PIMCO 25. It trades about 0.03 of its potential returns per unit of risk. PIMCO 25 Year is currently generating about -0.07 per unit of risk. If you would invest  8,199  in iShares 1 3 Year on September 5, 2024 and sell it today you would earn a total of  16.00  from holding iShares 1 3 Year or generate 0.2% return on investment over 90 days.

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

iShares 1 3 Year  vs.  PIMCO 25 Year

iShares 1 3

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 1 3 Year are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, IShares 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PIMCO 25 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO 25 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares 1 and PIMCO 25

The main advantage of trading using opposite IShares 1 and PIMCO 25 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, PIMCO 25 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 25 will offset losses from the drop in PIMCO 25's long position.

The idea behind iShares 1 3 Year and PIMCO 25 Year 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.