Correlation Between Vanguard and PIMCO Euro

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

By analyzing existing cross correlation between Vanguard SP 500 and PIMCO Euro Short Term, you can compare the effects of market volatilities on Vanguard and PIMCO Euro 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 Vanguard with a short position of PIMCO Euro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and PIMCO Euro.

Diversification Opportunities for Vanguard and PIMCO Euro

-0.39

Correlation Coefficient

Vanguard  PIMCO Euro

Very good diversification

The 3 months correlation between Vanguard and PIMCO is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and PIMCO Euro Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Euro Short and Vanguard 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 Vanguard SP 500 are associated (or correlated) with PIMCO Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Euro Short has no effect on the direction of Vanguard i.e., Vanguard and PIMCO Euro go up and down completely randomly.

Pair Corralation between Vanguard and PIMCO Euro

Assuming the 90 days trading horizon Vanguard SP 500 is expected to under-perform the PIMCO Euro. In addition to that, Vanguard is 9.14 times more volatile than PIMCO Euro Short Term. It trades about -0.11 of its total potential returns per unit of risk. PIMCO Euro Short Term is currently generating about 0.17 per unit of volatility. If you would invest  1,163  in PIMCO Euro Short Term on December 30, 2024 and sell it today you would earn a total of  15.00  from holding PIMCO Euro Short Term or generate 1.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Vanguard SP 500  vs.  PIMCO Euro Short Term

Vanguard SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

PIMCO Euro Short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Euro Short Term are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, PIMCO Euro is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vanguard and PIMCO Euro

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

The idea behind Vanguard SP 500 and PIMCO Euro Short Term 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.