Correlation Between PIMCO Broad and PIMCO 15

Can any of the company-specific risk be diversified away by investing in both PIMCO Broad and PIMCO 15 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 Broad and PIMCO 15 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PIMCO Broad TIPS and PIMCO 15 Year, you can compare the effects of market volatilities on PIMCO Broad and PIMCO 15 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 Broad with a short position of PIMCO 15. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Broad and PIMCO 15.

Diversification Opportunities for PIMCO Broad and PIMCO 15

0.91

Correlation Coefficient

PIMCO Broad  PIMCO 15

Almost no diversification

The 3 months correlation between PIMCO and PIMCO is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Broad TIPS and PIMCO 15 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO 15 Year and PIMCO Broad 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 Broad TIPS are associated (or correlated) with PIMCO 15. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO 15 Year has no effect on the direction of PIMCO Broad i.e., PIMCO Broad and PIMCO 15 go up and down completely randomly.

Pair Corralation between PIMCO Broad and PIMCO 15

Given the investment horizon of 90 days PIMCO Broad TIPS is expected to generate 0.42 times more return on investment than PIMCO 15. However, PIMCO Broad TIPS is 2.4 times less risky than PIMCO 15. It trades about 0.18 of its potential returns per unit of risk. PIMCO 15 Year is currently generating about 0.07 per unit of risk. If you would invest  5,174  in PIMCO Broad TIPS on December 28, 2024 and sell it today you would earn a total of  170.00  from holding PIMCO Broad TIPS or generate 3.29% return on investment over 90 days.

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

PIMCO Broad TIPS  vs.  PIMCO 15 Year

PIMCO Broad TIPS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Broad TIPS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, PIMCO Broad is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PIMCO 15 Year

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO 15 Year are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, PIMCO 15 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PIMCO Broad and PIMCO 15

The main advantage of trading using opposite PIMCO Broad and PIMCO 15 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO Broad position performs unexpectedly, PIMCO 15 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 15 will offset losses from the drop in PIMCO 15's long position.

The idea behind PIMCO Broad TIPS and PIMCO 15 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.