Correlation Between PIMCO 1 and Pacer Benchmark
Can any of the company-specific risk be diversified away by investing in both PIMCO 1 and Pacer Benchmark 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 Pacer Benchmark 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 Pacer Benchmark Data, you can compare the effects of market volatilities on PIMCO 1 and Pacer Benchmark 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 Pacer Benchmark. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO 1 and Pacer Benchmark.
Diversification Opportunities for PIMCO 1 and Pacer Benchmark
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between PIMCO and Pacer is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO 1 5 Year and Pacer Benchmark Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Benchmark Data 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 Pacer Benchmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Benchmark Data has no effect on the direction of PIMCO 1 i.e., PIMCO 1 and Pacer Benchmark go up and down completely randomly.
Pair Corralation between PIMCO 1 and Pacer Benchmark
Given the investment horizon of 90 days PIMCO 1 5 Year is expected to generate 0.14 times more return on investment than Pacer Benchmark. However, PIMCO 1 5 Year is 7.31 times less risky than Pacer Benchmark. It trades about -0.04 of its potential returns per unit of risk. Pacer Benchmark Data is currently generating about -0.37 per unit of risk. If you would invest 5,132 in PIMCO 1 5 Year on January 20, 2024 and sell it today you would lose (7.00) from holding PIMCO 1 5 Year or give up 0.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO 1 5 Year vs. Pacer Benchmark Data
Performance |
| Timeline |
| PIMCO 1 5 |
| Pacer Benchmark Data |
PIMCO 1 and Pacer Benchmark Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO 1 and Pacer Benchmark
The main advantage of trading using opposite PIMCO 1 and Pacer Benchmark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO 1 position performs unexpectedly, Pacer Benchmark 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 Pacer Benchmark will offset losses from the drop in Pacer Benchmark's long position.| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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