Can any of the company-specific risk be diversified away by investing in both PIMCO Enhanced and Vanguard ESG 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 Enhanced and Vanguard ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PIMCO Enhanced Short and Vanguard ESG US, you can compare the effects of market volatilities on PIMCO Enhanced and Vanguard ESG 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 Enhanced with a short position of Vanguard ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO Enhanced and Vanguard ESG.
Diversification Opportunities for PIMCO Enhanced and Vanguard ESG
The 3 months correlation between PIMCO and Vanguard is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO Enhanced Short and Vanguard ESG US in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard ESG US and PIMCO Enhanced 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 Enhanced Short are associated (or correlated) with Vanguard ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard ESG US has no effect on the direction of PIMCO Enhanced i.e., PIMCO Enhanced and Vanguard ESG go up and down completely randomly.
Pair Corralation between PIMCO Enhanced and Vanguard ESG
Given the investment horizon of 90 days PIMCO Enhanced Short is expected to generate 0.1 times more return on investment than Vanguard ESG. However, PIMCO Enhanced Short is 9.82 times less risky than Vanguard ESG. It trades about 0.17 of its potential returns per unit of risk. Vanguard ESG US is currently generating about -0.04 per unit of risk. If you would invest 9,530 in PIMCO Enhanced Short on September 7, 2023 and sell it today you would earn a total of 451.00 from holding PIMCO Enhanced Short or generate 4.73% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Enhanced Short are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PIMCO Enhanced is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard ESG US are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Vanguard ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
PIMCO Enhanced and Vanguard ESG Volatility Contrast
Predicted Return Density
Pair Trading with PIMCO Enhanced and Vanguard ESG
The main advantage of trading using opposite PIMCO Enhanced and Vanguard ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO Enhanced position performs unexpectedly, Vanguard ESG 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 Vanguard ESG will offset losses from the drop in Vanguard ESG's long position.
The idea behind PIMCO Enhanced Short and Vanguard ESG US 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.
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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