Correlation Between PIMCO Short and VanEck Long

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

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

Diversification Opportunities for PIMCO Short and VanEck Long

0.36

Correlation Coefficient

PIMCO Short  VanEck Long

Weak diversification

The 3 months correlation between PIMCO and VanEck is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Short Term and VanEck Long Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Long Muni and PIMCO 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 PIMCO Short Term are associated (or correlated) with VanEck Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Long Muni has no effect on the direction of PIMCO Short i.e., PIMCO Short and VanEck Long go up and down completely randomly.

Pair Corralation between PIMCO Short and VanEck Long

Given the investment horizon of 90 days PIMCO Short Term is expected to generate 0.23 times more return on investment than VanEck Long. However, PIMCO Short Term is 4.26 times less risky than VanEck Long. It trades about 0.23 of its potential returns per unit of risk. VanEck Long Muni is currently generating about 0.01 per unit of risk. If you would invest  4,940  in PIMCO Short Term on December 19, 2024 and sell it today you would earn a total of  59.00  from holding PIMCO Short Term or generate 1.19% return on investment over 90 days.

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

PIMCO Short Term  vs.  VanEck Long Muni

PIMCO Short Term

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Short Term are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, PIMCO Short is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

VanEck Long Muni

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Long Muni has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, VanEck Long is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PIMCO Short and VanEck Long

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

The idea behind PIMCO Short Term and VanEck Long Muni 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.