Correlation Between PIMCO 25 and Simplify Exchange

Can any of the company-specific risk be diversified away by investing in both PIMCO 25 and Simplify Exchange 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 25 and Simplify Exchange into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PIMCO 25 Year and Simplify Exchange Traded, you can compare the effects of market volatilities on PIMCO 25 and Simplify Exchange 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 25 with a short position of Simplify Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO 25 and Simplify Exchange.

Diversification Opportunities for PIMCO 25 and Simplify Exchange

0.74

Correlation Coefficient

PIMCO 25  Simplify Exchange

Poor diversification

The 3 months correlation between PIMCO and Simplify is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO 25 Year and Simplify Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Exchange Traded and PIMCO 25 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 25 Year are associated (or correlated) with Simplify Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Exchange Traded has no effect on the direction of PIMCO 25 i.e., PIMCO 25 and Simplify Exchange go up and down completely randomly.

Pair Corralation between PIMCO 25 and Simplify Exchange

Given the investment horizon of 90 days PIMCO 25 Year is expected to under-perform the Simplify Exchange. In addition to that, PIMCO 25 is 2.67 times more volatile than Simplify Exchange Traded. It trades about -0.62 of its total potential returns per unit of risk. Simplify Exchange Traded is currently generating about -0.2 per unit of volatility. If you would invest  2,154  in Simplify Exchange Traded on October 5, 2024 and sell it today you would lose (36.00) from holding Simplify Exchange Traded or give up 1.67% of portfolio value over 90 days.

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

PIMCO 25 Year  vs.  Simplify Exchange Traded

PIMCO 25 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO 25 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Simplify Exchange Traded

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simplify Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Simplify Exchange is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PIMCO 25 and Simplify Exchange

The main advantage of trading using opposite PIMCO 25 and Simplify Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO 25 position performs unexpectedly, Simplify Exchange 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 Simplify Exchange will offset losses from the drop in Simplify Exchange's long position.

The idea behind PIMCO 25 Year and Simplify Exchange Traded 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.