Correlation Between SPDR Portfolio and PIMCO 25

Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio 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 Portfolio 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 Portfolio Intermediate and PIMCO 25 Year, you can compare the effects of market volatilities on SPDR Portfolio 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 Portfolio with a short position of PIMCO 25. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and PIMCO 25.

Diversification Opportunities for SPDR Portfolio and PIMCO 25

0.85

Correlation Coefficient

SPDR Portfolio  PIMCO 25

Very poor diversification

The 3 months correlation between SPDR and PIMCO is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio Intermediate 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 Portfolio 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 Portfolio Intermediate 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 Portfolio i.e., SPDR Portfolio and PIMCO 25 go up and down completely randomly.

Pair Corralation between SPDR Portfolio and PIMCO 25

Given the investment horizon of 90 days SPDR Portfolio Intermediate is expected to generate 0.2 times more return on investment than PIMCO 25. However, SPDR Portfolio Intermediate is 5.0 times less risky than PIMCO 25. It trades about 0.17 of its potential returns per unit of risk. PIMCO 25 Year is currently generating about 0.03 per unit of risk. If you would invest  2,762  in SPDR Portfolio Intermediate on December 27, 2024 and sell it today you would earn a total of  74.00  from holding SPDR Portfolio Intermediate or generate 2.68% return on investment over 90 days.

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

SPDR Portfolio Intermediate  vs.  PIMCO 25 Year

SPDR Portfolio Inter

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio Intermediate are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, SPDR Portfolio is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

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 Portfolio and PIMCO 25

The main advantage of trading using opposite SPDR Portfolio and PIMCO 25 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio 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 Portfolio Intermediate 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.