Correlation Between VanEck Short and PIMCO Intermediate

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

By analyzing existing cross correlation between VanEck Short Muni and PIMCO Intermediate Municipal, you can compare the effects of market volatilities on VanEck Short and PIMCO Intermediate 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 VanEck Short with a short position of PIMCO Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Short and PIMCO Intermediate.

Diversification Opportunities for VanEck Short and PIMCO Intermediate

0.8

Correlation Coefficient

VanEck Short  PIMCO Intermediate

Very poor diversification

The 3 months correlation between VanEck and PIMCO is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Short Muni and PIMCO Intermediate Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Intermediate and VanEck Short 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 VanEck Short Muni are associated (or correlated) with PIMCO Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Intermediate has no effect on the direction of VanEck Short i.e., VanEck Short and PIMCO Intermediate go up and down completely randomly.

Pair Corralation between VanEck Short and PIMCO Intermediate

Considering the 90-day investment horizon VanEck Short is expected to generate 1.99 times less return on investment than PIMCO Intermediate. But when comparing it to its historical volatility, VanEck Short Muni is 2.87 times less risky than PIMCO Intermediate. It trades about 0.31 of its potential returns per unit of risk. PIMCO Intermediate Municipal is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  5,174  in PIMCO Intermediate Municipal on December 4, 2024 and sell it today you would earn a total of  54.00  from holding PIMCO Intermediate Municipal or generate 1.04% return on investment over 90 days.

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

VanEck Short Muni  vs.  PIMCO Intermediate Municipal

VanEck Short Muni

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Short Muni are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, VanEck Short is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

PIMCO Intermediate

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Intermediate Municipal are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, PIMCO Intermediate is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with VanEck Short and PIMCO Intermediate

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

The idea behind VanEck Short Muni and PIMCO Intermediate Municipal 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.