Correlation Between Short Precious and Pimco International

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

By analyzing existing cross correlation between Short Precious Metals and Pimco International Bond, you can compare the effects of market volatilities on Short Precious and Pimco International 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 Short Precious with a short position of Pimco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Precious and Pimco International.

Diversification Opportunities for Short Precious and Pimco International

0.41

Correlation Coefficient

Short Precious  Pimco International

Very weak diversification

The 3 months correlation between Short and Pimco is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Short Precious Metals and Pimco International Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco International Bond and Short Precious 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 Short Precious Metals are associated (or correlated) with Pimco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco International Bond has no effect on the direction of Short Precious i.e., Short Precious and Pimco International go up and down completely randomly.

Pair Corralation between Short Precious and Pimco International

Assuming the 90 days horizon Short Precious is expected to generate 124.0 times less return on investment than Pimco International. In addition to that, Short Precious is 8.59 times more volatile than Pimco International Bond. It trades about 0.0 of its total potential returns per unit of risk. Pimco International Bond is currently generating about 0.11 per unit of volatility. If you would invest  879.00  in Pimco International Bond on September 26, 2024 and sell it today you would earn a total of  114.00  from holding Pimco International Bond or generate 12.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Short Precious Metals  vs.  Pimco International Bond

Short Precious Metals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Short Precious Metals are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Short Precious showed solid returns over the last few months and may actually be approaching a breakup point.

Pimco International Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco International Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pimco International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short Precious and Pimco International

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

The idea behind Short Precious Metals and Pimco International Bond 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.