Correlation Between PIMCO Short and Xtrackers Municipal

Can any of the company-specific risk be diversified away by investing in both PIMCO Short and Xtrackers Municipal 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 Xtrackers Municipal 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 Xtrackers Municipal Infrastructure, you can compare the effects of market volatilities on PIMCO Short and Xtrackers Municipal 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 Xtrackers Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Short and Xtrackers Municipal.

Diversification Opportunities for PIMCO Short and Xtrackers Municipal

0.83

Correlation Coefficient

PIMCO Short  Xtrackers Municipal

Very poor diversification

The 3 months correlation between PIMCO and Xtrackers is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Short Term and Xtrackers Municipal Infrastruc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Municipal 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 Xtrackers Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Municipal has no effect on the direction of PIMCO Short i.e., PIMCO Short and Xtrackers Municipal go up and down completely randomly.

Pair Corralation between PIMCO Short and Xtrackers Municipal

Given the investment horizon of 90 days PIMCO Short Term is expected to generate 0.36 times more return on investment than Xtrackers Municipal. However, PIMCO Short Term is 2.8 times less risky than Xtrackers Municipal. It trades about -0.19 of its potential returns per unit of risk. Xtrackers Municipal Infrastructure is currently generating about -0.42 per unit of risk. If you would invest  5,012  in PIMCO Short Term on October 9, 2024 and sell it today you would lose (25.00) from holding PIMCO Short Term or give up 0.5% of portfolio value over 90 days.

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

PIMCO Short Term  vs.  Xtrackers Municipal Infrastruc

PIMCO Short Term

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Short Term are ranked lower than 1 (%) 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.

Xtrackers Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers Municipal Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Xtrackers Municipal is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PIMCO Short and Xtrackers Municipal

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

The idea behind PIMCO Short Term and Xtrackers Municipal Infrastructure 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 Transaction History module to view history of all your transactions and understand their impact on performance.