Correlation Between PIMCO 1 and Vanguard Short

Can any of the company-specific risk be diversified away by investing in both PIMCO 1 and Vanguard Short 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 1 and Vanguard Short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PIMCO 1 5 Year and Vanguard Short Term Inflation Protected, you can compare the effects of market volatilities on PIMCO 1 and Vanguard Short 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 1 with a short position of Vanguard Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO 1 and Vanguard Short.

Diversification Opportunities for PIMCO 1 and Vanguard Short

0.9

Correlation Coefficient

PIMCO 1  Vanguard Short

Almost no diversification

The 3 months correlation between PIMCO and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO 1 5 Year and Vanguard Short Term Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term and PIMCO 1 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 1 5 Year are associated (or correlated) with Vanguard Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of PIMCO 1 i.e., PIMCO 1 and Vanguard Short go up and down completely randomly.

Pair Corralation between PIMCO 1 and Vanguard Short

Given the investment horizon of 90 days PIMCO 1 is expected to generate 1.04 times less return on investment than Vanguard Short. In addition to that, PIMCO 1 is 1.56 times more volatile than Vanguard Short Term Inflation Protected. It trades about 0.19 of its total potential returns per unit of risk. Vanguard Short Term Inflation Protected is currently generating about 0.31 per unit of volatility. If you would invest  4,885  in Vanguard Short Term Inflation Protected on September 17, 2024 and sell it today you would earn a total of  17.00  from holding Vanguard Short Term Inflation Protected or generate 0.35% return on investment over 90 days.

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

PIMCO 1 5 Year  vs.  Vanguard Short Term Inflation

PIMCO 1 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO 1 5 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, PIMCO 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Short Term

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Inflation Protected are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Vanguard Short is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PIMCO 1 and Vanguard Short

The main advantage of trading using opposite PIMCO 1 and Vanguard Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO 1 position performs unexpectedly, Vanguard Short 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 Vanguard Short will offset losses from the drop in Vanguard Short's long position.

The idea behind PIMCO 1 5 Year and Vanguard Short Term Inflation Protected 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.