Correlation Between SPDR Barclays and PIMCO 25

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

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

Diversification Opportunities for SPDR Barclays and PIMCO 25

0.95

Correlation Coefficient

SPDR Barclays  PIMCO 25

Almost no diversification

The 3 months correlation between SPDR and PIMCO is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Barclays Long 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 SPDR Barclays 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 SPDR Barclays Long 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 SPDR Barclays i.e., SPDR Barclays and PIMCO 25 go up and down completely randomly.

Pair Corralation between SPDR Barclays and PIMCO 25

Given the investment horizon of 90 days SPDR Barclays is expected to generate 1.38 times less return on investment than PIMCO 25. But when comparing it to its historical volatility, SPDR Barclays Long is 2.22 times less risky than PIMCO 25. It trades about 0.05 of its potential returns per unit of risk. PIMCO 25 Year is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,837  in PIMCO 25 Year on December 27, 2024 and sell it today you would earn a total of  117.00  from holding PIMCO 25 Year or generate 1.71% return on investment over 90 days.

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

SPDR Barclays Long  vs.  PIMCO 25 Year

SPDR Barclays Long

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Barclays Long are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, SPDR Barclays 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

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO 25 Year are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, PIMCO 25 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Barclays and PIMCO 25

The main advantage of trading using opposite SPDR Barclays and PIMCO 25 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Barclays 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 SPDR Barclays Long 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.