Correlation Between MicroSectors FANG and PIMCO 1
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and PIMCO 1 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 MicroSectors FANG and PIMCO 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and PIMCO 1 5 Year, you can compare the effects of market volatilities on MicroSectors FANG and PIMCO 1 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 MicroSectors FANG with a short position of PIMCO 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and PIMCO 1.
Diversification Opportunities for MicroSectors FANG and PIMCO 1
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MicroSectors and PIMCO is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and PIMCO 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO 1 5 and MicroSectors FANG 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 MicroSectors FANG Index are associated (or correlated) with PIMCO 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO 1 5 has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and PIMCO 1 go up and down completely randomly.
Pair Corralation between MicroSectors FANG and PIMCO 1
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 30.09 times more return on investment than PIMCO 1. However, MicroSectors FANG is 30.09 times more volatile than PIMCO 1 5 Year. It trades about 0.15 of its potential returns per unit of risk. PIMCO 1 5 Year is currently generating about -0.05 per unit of risk. If you would invest 3,572 in MicroSectors FANG Index on January 25, 2024 and sell it today you would earn a total of 481.00 from holding MicroSectors FANG Index or generate 13.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
MicroSectors FANG Index vs. PIMCO 1 5 Year
Performance |
| Timeline |
| MicroSectors FANG Index |
| PIMCO 1 5 |
MicroSectors FANG and PIMCO 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and PIMCO 1
The main advantage of trading using opposite MicroSectors FANG and PIMCO 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, PIMCO 1 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 1 will offset losses from the drop in PIMCO 1's long position.The idea behind MicroSectors FANG Index and PIMCO 1 5 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.| PIMCO 1 vs. iShares iBoxx Investment | PIMCO 1 vs. iShares 1 3 Year | PIMCO 1 vs. iShares 7 10 Year | PIMCO 1 vs. iShares Core Aggregate |
Check out your portfolio center.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| AI Investment Finder Use AI to screen and filter profitable investment opportunities | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |