Correlation Between PIMCO Broad and IShares TIPS
Can any of the company-specific risk be diversified away by investing in both PIMCO Broad and IShares TIPS 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 IShares TIPS 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 iShares TIPS Bond, you can compare the effects of market volatilities on PIMCO Broad and IShares TIPS 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 IShares TIPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Broad and IShares TIPS.
Diversification Opportunities for PIMCO Broad and IShares TIPS
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between PIMCO and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Broad TIPS and iShares TIPS Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares TIPS Bond 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 IShares TIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares TIPS Bond has no effect on the direction of PIMCO Broad i.e., PIMCO Broad and IShares TIPS go up and down completely randomly.
Pair Corralation between PIMCO Broad and IShares TIPS
Given the investment horizon of 90 days PIMCO Broad TIPS is expected to under-perform the IShares TIPS. But the etf apears to be less risky and, when comparing its historical volatility, PIMCO Broad TIPS is 1.01 times less risky than IShares TIPS. The etf trades about -0.17 of its potential returns per unit of risk. The iShares TIPS Bond is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest 10,697 in iShares TIPS Bond on January 26, 2024 and sell it today you would lose (130.00) from holding iShares TIPS Bond or give up 1.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PIMCO Broad TIPS vs. iShares TIPS Bond
Performance |
| Timeline |
| PIMCO Broad TIPS |
| iShares TIPS Bond |
PIMCO Broad and IShares TIPS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO Broad and IShares TIPS
The main advantage of trading using opposite PIMCO Broad and IShares TIPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO Broad position performs unexpectedly, IShares TIPS 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 IShares TIPS will offset losses from the drop in IShares TIPS's long position.| PIMCO Broad vs. iShares iBoxx Investment | PIMCO Broad vs. iShares 1 3 Year | PIMCO Broad vs. iShares 7 10 Year | PIMCO Broad vs. iShares Core Aggregate |
| IShares TIPS vs. iShares iBoxx Investment | IShares TIPS vs. iShares 1 3 Year | IShares TIPS vs. iShares 7 10 Year | IShares TIPS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |