Correlation Between IShares 0 and PIMCO 1
Can any of the company-specific risk be diversified away by investing in both IShares 0 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 IShares 0 and PIMCO 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares 0 5 Year and PIMCO 1 5 Year, you can compare the effects of market volatilities on IShares 0 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 IShares 0 with a short position of PIMCO 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 0 and PIMCO 1.
Diversification Opportunities for IShares 0 and PIMCO 1
Very poor diversification
The 3 months correlation between IShares and PIMCO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares 0 5 Year 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 IShares 0 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 iShares 0 5 Year 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 IShares 0 i.e., IShares 0 and PIMCO 1 go up and down completely randomly.
Pair Corralation between IShares 0 and PIMCO 1
Given the investment horizon of 90 days iShares 0 5 Year is expected to generate 0.87 times more return on investment than PIMCO 1. However, iShares 0 5 Year is 1.15 times less risky than PIMCO 1. It trades about 0.01 of its potential returns per unit of risk. PIMCO 1 5 Year is currently generating about -0.03 per unit of risk. If you would invest 9,928 in iShares 0 5 Year on January 26, 2024 and sell it today you would earn a total of 3.00 from holding iShares 0 5 Year or generate 0.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 91.3% |
| Values | Daily Returns |
iShares 0 5 Year vs. PIMCO 1 5 Year
Performance |
| Timeline |
| iShares 0 5 |
| PIMCO 1 5 |
IShares 0 and PIMCO 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 0 and PIMCO 1
The main advantage of trading using opposite IShares 0 and PIMCO 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 0 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.| IShares 0 vs. iShares iBoxx Investment | IShares 0 vs. iShares 1 3 Year | IShares 0 vs. iShares 7 10 Year | IShares 0 vs. iShares Core Aggregate |
| 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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